UK house prices post biggest fall since October 2008 - Halifax data today Weds 7th Dec

[jimmyjammy001]

Just a quick note for anyone looking to buy, in particular first time buyers who run the extreme risk of running into negative equity if buying with a low deposit

UK house prices post biggest fall since October 2008

Also its important to note that "Property prices are up more than £12,000 compared to this time last year, and well above pre-pandemic levels (+£46,403 vs March 2020). "

I suspect there will be bigger falls yet still to come as well

Majority of people don't buy £1 million houses. It is true though that if house prices are falling bank of mum and dad may not be as forth coming.

A lady I know has downsized. Her house is incredibly huge in a desirable part of north London. It is so big that it was bought by developers to convert into 4 flats. I asked her why she downsized to a tiny terraced (still worth around 800k ) and she said - my children want me to

The point is that it is very unusual (outside of wealthy Londoner circles) for both sets of parents to give £200K.
Most people get nothing or a small fraction of 200K

I wont get anything - which pisses me off as both my parents inherited and as a result i made sure that my children will get a minimum of 250 K each.

It doesn't work like that in reality. As you said at the beginning, it takes a seller and buyer to reach an agreement.
Presumably you don't need or want to sell your house so this isn't going to affect you. There will always be some forced (unwilling) sellers for various reasons. They may not want to sell for whatever the potential buyer has offered but, if no one else offers, and they have to sell they will be forced to do so.
This makes the value of everyone else's homes fall too.
If your house was worth a theoretical 1 million in peak 2021/ early 2022 and your neighbour is forced to sell their identical house for 700K, because no one is willing to pay £1 million as the cost of credit has risen so much, your house will now be worth 700K too. If you needed to sell, you would need to accept the fact that it had fallen in value from the peak if you don't, it is as theoretical as the previous £1 million valuation.
The same thing happened in reverse when the market is rising fast as in 2020-21.

@Twiglets1 I understand but the law may well be changed to make this harder. Giving your house to your children is obviously deprivation of assets and the rules on this may tighten up, for example.

It also depends what stage you are at, if my house lost 30% in value I wouldn't not sell just because. It would depend on what I was buying.

As quickly as the law changes you will find expensive lawyers working on legal ways around the new laws. It’s not illegal to give away your assets in your old age and if they make it illegal, the rich will find other way to pass on their wealth to their children. They’ve been doing it for generations & generations and don’t forget, most politicians are wealthy themselves.

@rainingsnoring you’ve hit the nail on the head. Some will be forced sellers. In reality that will be a tiny number and generally speaking that I’m be in a bit on kind now it will be in crappy areas that nobody wants to live anyway, and therefore they will be scooped up by the aforementioned corporate investors who will become the previous owners, landlords.
I’m not suggesting it doesn’t happen, but it’s a rare day when a beautiful house in a nice location in good condition comes on the market as a fire sale and when it does, that will be so many people bidding for what they will perceived to be a bargain, it actually won’t be a bargain at all.

'As quickly as the law changes you will find expensive lawyers working on legal ways around the new laws. It’s not illegal to give away your assets in your old age and if they make it illegal, the rich will find other way to pass on their wealth to their children. They’ve been doing it for generations & generations and don’t forget, most politicians are wealthy themselves.'
@Twiglets1 -this really is a pretty minor point which you keep hammering home.

@CrazCrashy -I disagree that it will only be 'crappy' areas which see significant falls. Plenty of naice areas in London and elsewhere are already experiencing falls in prices. Some people in nice areas are massively over leveraged or on interest only mortgages, some may lose their very well paid jobs and be unable to get another, some may be asset rich and cash poor and be prepared to take a much reduced price in order to get on with their lives because they have already made an excellent profit. I find your view far too simplistic.

Im sure you dont find anything simplistic @rainingsnoring otherwise youd be aware how human emotions work and how resistant they are to “moving on with their lives”

I don't know who 'they' is. All older people en masse? Sure, some will not be unwilling to compromise even if something is clearly in their best interest, others will simply choose not to but some will take a different view and be far ore pragmatic. As with everything, different humans have different feelings and make a variety of decisions.

Few of you are considering what happens to very elderly people. They develop the diseases of gerontocracy, like Alzheimers and vascular dementia. They could be clever and in decent physical health but once they can't distinguish between the cooker and the fridge they are a danger to themselves. So you have to organise care, a few hours initially, and it ramps up. Eventually, if your parents gave you PoA, you conclude they need residential care, hoping that their savings will pay for it as long as they live. At an average £4k per month pp, a life's savings can be burned through surprisingly fast. It took eight months before we/she had spent the savings, and had to sell DMIL's house -- for a very decent price ramped up by the Covid desire for space and gardens, which left almost exactly as much as the house was worth before the 10 year old equity release deal. Two years later there's not enough left over for IHT/HMRC to bother about. It will however, improve my DSIL's quality of retirement.

"If your house was worth a theoretical 1 million in peak 2021/ early 2022 and your neighbour is forced to sell their identical house for 700K, because no one is willing to pay £1 million as the cost of credit has risen so much, your house will now be worth 700K too."

Nope, that's wrong. My house will be worth whatever the next buyer is prepared to pay for it, as and when I sell it. That could be £700k ... but it could be £1m. Could also be £600k. The only thing it isn't, is determined by the sale of the the last house.

True plus I’d love to know where these houses are that an estate agent has valued at a million but the owner will accept £700,000. It’s pure fantasy.

House Price indices for an area, and asking prices for a specific property, are both what are known by psychologists as 'anchors'. They exist to frame a particular decision at a desired price point.

An asking price also serves a practical function - many people filter searches by price, and won't bother even enquiring about a property if the asking price is too far beyond their means. Setting the right asking price to maximise serious, proceedable buyers is very important.

But ... the eventual sales price has more to do with the negotiating skills of the parties, how much the buyer wants that house at that moment, what they believe the competition is prepared to bid, and the opportunity costs the seller is considering when deciding to accept or reject an offer.

All this thinking stems for the HPC fallacy that there ought to be a 'correct' price for a house. There isn't. Each property is unique. As is each potential bidder. It's always a negotiation, and one where the final say is always with the seller. Insufficient incentive to sell = no sale.

Who says the EA valued the house at 1 million? I said that it was theoretically worth 1 million(based on comparators) in 2021. Perhaps, in 12 months, this house is now valued at 800K as prices have fallen and the seller is now forced to accept 700K as in the theoretical example. After all, plenty of people were cheering on the way up (it sounds as if you may have been one) when prices rose 20% plus in the last 18 months. It's hardly fantasy to suggest that they could fall back 20% plus now is it.
@Mark19735 - valuations are based on recent house sales so, unfortunately, your theoretical house value will indeed fall to 700K. As I have already said, if you needed to sell, you would need to accept something similar to your neighbour but, if you don't, the 700K value is as theoretical as the 1 million was in 2021.
From the way you post, you seem to be assuming a constant seller's market. Unfortunately, that has changed to a buyer's market in lots of areas and that is expected to escalate next year.

All quite reasonable, as long as all the houses are comparable. But if you looked at my postcode, they aren't. There's a terraced run of 24 pleasant Victorian houses, with on street parking, to a mansion at the bottom and four or five one-off newer builds at the top. The valuations run from £250k for a run down Victorian with no improvements to £1.75 million for a rather lovely big and very private Victorian house in a south facing walled garden. You might as well compare chalk and cheese.

@rainingsnoring When you say valuations, you mean mortgage valuations, right? Which adds a layer of complexity, as the bank is interested in what the next buyer after the current one might pay, in the event of foreclosure. But even then, LTV is a bigger determinant of the bank's risk than house price indexes.

There is also a significant difference between the best possible price a house could achieve, given unlimited time and budget to stage and market it, versus the best price a seller can realistically achieve if they need to exchange and complete 12 weeks from today and expect to live there in the meantime. Those are indeed two different prices, but they are not attributes of the house. They are attributes of the seller and their specific circumstances. If a desperate seller sells in a fire sale to a cash buyer who has dreamed of owning that house their whole life and intends to live there for another 40 years, then on completion the house will instantly appreciate in value by a huge amount, regardless of economic conditions at the time.

It's also not that I'm assuming a perpetual sellers market (although there is some truth to the maxim that they don't make land anymore, and the population needing shelter continues to rise year on year), it's more that I don't accept the concept of 'needing to sell'. It's always a choice. Houses aren't perishable goods, and they have utility providing accommodation in addition to having intrinsic value. The rental yield effectively sets a floor price, below which no house will ever fall.

Ultimately, though, I simply don't care what an aggregated opinion of people who aren't going to buy my house think a buyer should pay. I'm only interested in what the person who is going to buy my house will actually offer for it. If, and only if, it's greater than the value I place on it, then that's its value. If not, then the price at which I would have sold it is it's value.

I was referring to estate agent valuations based on recent comparators. See @Twiglets1 's comment above.

I still think you are assuming a seller's market/ rising market. What you have written below is simply not true in a falling market. He who panics first panics best, so to speak and the seller who is pragmatic and decides to take a lower offer than they were hoping to achieve initially will make more than the seller who decides to hold out for some theoretical value they have in their head. As the market falls further and sentiment wanes further, potential seller 2 will either have to accept an even lower price if they need to sell and want to sell or not sell at all. I don't think you understand market value; it's not this 'then the price at which I would have sold it is it's value'. However, as I've already said, if you don't want or need to sell, it's all theoretical and not an issue to be concerned about at all.

'There is also a significant difference between the best possible price a house could achieve, given unlimited time and budget to stage and market it, versus the best price a seller can realistically achieve if they need to exchange and complete 12 weeks from today and expect to live there in the meantime'

@XingMing -of course valuations will vary where houses vary hugely as in your local area. In a rising market, all will tend to rise and in a falling market, the opposite will tend to occur.

If comparable houses were selling at 1 million in 2021 they would not only be worth 700k now. Prices only rose as quickly as they did because the government artificially excited the market by abolishing stamp duty for a fixed term, so buyers felt they had a small window of opportunity in which to benefit from that. First time buyers rushed to get on the property ladder without paying stamp duty and that had a knock on effect on the whole market. But even at that time, 700k houses did not rise to 1 million.
If you can now pick up 2021 million pound houses for the bargain price of 700k I wonder why there isn’t a stampede of people buying them? It’s odd because in my area ( South East) the roads with the 1 million pound houses on them are STILL selling for around I million. You’re living in fantasy land with your theoretical example.

You can't do this if the property has a mortgage

And unless the parent is paying market rent then it would still be liable for iht as they have retained a beneficial interest in the house

But you can do it if the property doesn’t have a mortgage which it quite likely won’t if it is being gifted by an elderly parent.
If the parent isn’t paying market rent then you are still liable for Capital Gains Tax but not IHT. It already technically belongs to you so it is not part of the inheritance. You can even sell the property while the parent is still alive if you want to because it is your property.

@Twiglets1 -you don't seem to have read what I wrote. I said 'perhaps, in 12 months time'. That would take us to the end of 2023.
Some houses did indeed rise 25/30% in price during the stampede from Jun 2020-early 2022. Just because they didn't in your area, it doesn't follow that they didn't elsewhere.
Everyone understands that the highly irresponsibly stamp duty fuelled the huge rise in asset values. But it wasn't just that. It was the BOE dropping interest rates to zero, the massive QE program and the government throwing money at people in various forms.
Now, there is no more stamp duty holiday but, more importantly, rates have risen very significantly in a short time period, the BOE have started QT, there is no more furlough and inflation is very high. The removal of the cheap money is what is causing and will continue to cause the price falls. Sorry to disappoint you but it is perfectly conceivable that house that shot up from 700 or 800K during the pandemic period, could now fall back those that sort of value in 12 months. If you don't like the exact figures, rearrange them but the point still remains.

We’ll have to agree to disagree. I just don’t agree that houses rose that much in the pandemic (700k to a million) or that they will fall that dramatically now. The consensus amongst property experts seems to be a likely fall of about 10% next year in most areas, and then a modest growth. But there’s no point discussing it any more with you.

Sorry should have added to this @Alexalee that you are not liable for IHT as long as they live for at least 7 years after gifting you the house.