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

i think it’s good news for lots of first time buyers….my house is bought and paid for so I’m not worried either way…but I would like to see younger people being able to get on the ladder

The FT one is behind a paywall and the other one just says that average prices of London flats have fallen 11% since their peak in August 2020.

So my point stands than & isn't anecdotal 😆

Unfortunately I don't know how to share Times stuff.

I think most of us are aware that the prices of many London flats did suffer during the pandemic from their lack of outside space, plus more people working from home.

And yet I was told I was making it up... To be pernickety though London flats were being impacted before covid although that didn't help.

This thread is bizarre! 😆

I don’t believe you have proved what you seem to believe - that lots of flats in London have sold twice within the last 5ish years for less money the second time. Not many properties sell twice within a 5 year period but you claim to know a few people it has happened to. Not willing to give postcodes though.

And if London flats were being impacted before Covid why was August 2020 the peak re prices?

You don't seem to understand what I am saying, I don't think it's complicated but 🤷🏻‍♀️

Flat prices peaking in 2020 doesn't mean that the growth rate followed the same trajectory for the years prior. You can see that in the graph from the land registry.

Anyway I'm not sure what your agenda is but good luck!

I don’t have an agenda 🤷🏼‍♀️

No agenda here either. Just annoyed by people claiming things to be facts when the evidence quite clearly shows the contrary.

Now, if your statement was "some people who sold flats in London in the last two years sold their flats for less than some other people sold other flats in London 5 years ago", then sure - I've no problem with that. Congratulations - you win.

I'll have a go now. My mate sold his car this summer for £3k and my other mate sold her car three years ago for £9k. By your logic, this means we'll all be buying cars in 2025 for £1k. Can you see now what the problem with your reasoning is?

I don't agree with your definition of a price drop.
Even if I did accept it, you have entirely failed to account for inflation, which is significantly under measured by current measures. So, for example, if house prices have risen an average of 8% in the last 12 months but the annual rate of inflation is 11%, this represents a real terms fall. This is before you take into account stamp duty and other fees attached to a house purchase.

I also don't understand why you are so triggered by this. You have used hyperbole when responding to @chary 's comments about how London flats in some areas have sold for less than purchase price in the last few years. She/he didn't mention a crash (your word), merely that the market for flats in London has been stagnant since Brexit. This has been widely discussed in the media as has the fall in desirability/price of flats in London during the pandemic.

This thread is about house prices falling from the peak of early-mid 2022 depending on area. Asking prices are now falling. We are now below peak price (on average, obviously). Prices are widely predicted to continue to fall from peak although we don't know exactly how much or which areas will fall more/ less. As has already been discussed, for house owners who do not need or wish to sell, this is entirely theoretical, just as the rises have been.

This example you have given is an utter nonsense and not in any way similar to what anyone has suggested on this thread.

'I'll have a go now. My mate sold his car this summer for £3k and my other mate sold her car three years ago for £9k. By your logic, this means we'll all be buying cars in 2025 for £1k. Can you see now what the problem with your reasoning is?'

Think I may have mentioned this on another thread - but yes, inflation does mean that many properties have indeed seen reductions in price in real terms. In much the same way, one individual's personal good fortune (inheritance, promotion, good bonus, premium bond win) will mean that the same house suddenly becomes much more affordable to them - although in all likelihood they will widen their search to include bigger houses in better areas. Nevertheless, inflation has the same effect on affordability as price drops for the buyer. But ... what it doesn't do is lead to systemic drops in the prices of all houses or create contagion - which is why I maintain that if I sell a house to you for more than I paid for it - even £5 more - it doesn't matter that it seems cheaper to you than it did to me when I bought it - it's still a price rise, not a price drop.

I literally posted the below

"plenty of flats in London sold for less than the previous sold price in the last few years."

but you are upset because I didn't write " "some people who sold flats in London in the last two years sold their flats for less than some other people sold other flats in London 5 years ago","

🤣🤣🤣🤣

You clearly are triggered because it's not normal to respond to me the way you have, accuse me of lying & then twist what I have said.

Hopefully Santa will bring you a better 2023 though!

This all seems muddled.
I can't see the relevance of an individual's good financial fortune, or indeed, another individual's misfortune when discussing CPI/ RPI inflation.

'Nevertheless, inflation has the same effect on affordability as price drops for the buyer.'
This makes no sense to me. Systemic inflation in goods and services reduces house price affordability for the buyer as they have less income to spend servicing a mortgage and saving for a deposit and are likely to be lent a smaller sum. This is before we start on interest rate rises which occur and are currently occurring because of inflation. Reductions in house prices (asset deflation) increases affordability, at least in theory.
'But ... what it doesn't do is lead to systemic drops in the prices of all houses or create contagion'
Inflation (generally), leads to central bank action. They have limited tools but they can raise interest rates and are doing so. This has a knock on effect on house prices hence recent falls and v significant falls in buyer interest. Once sentiment and prices fall, less buyers are interested in buying a filing asset and it is perfectly possible for 'contagion' to spread.

General inflation is inflation of everything ... milk, bread, council tax, cars, wages, houses. Inflation isn't just RPI/CPI.

That inflation will start in some areas (2022: energy) and then spread to others (2023: wages). Interest rates usually rise during times of inflation as lenders want their cash to preserve it's spending power, so the interest they charge usually needs to outstrip inflation.

If the things that one person needs or wants to buy require a smaller share of the money that person has available, then the relative price of that thing has gone down. If I get a pay rise of 10%, then anything I wanted to buy (e.g. a house) has effectively become 10% cheaper. Often the reason I got is 10% pay rise is because everything I need to buy is already 10% more expensive, so the timing of when things increase in price matters. Except ... the mortgage you've already taken out doesn't increase in line with inflation. It stays the same, whilst everything else, including wages, eventually goes up.

Getting a better job with a 10% raise has the same practical effect on affordability for me as a 10% drop in house prices would have. It shouldn't matter to me which it is. Getting a 10% raise in my current job is no different.

Something similar has just happened to my daughter. Became a homeowner in May 2022 and took on a scary mortgage, though at a good interest rate fixed for 3 years.
Shes just heard her annual salary increase from January will be 12%. Higher than normal but the company are presumably reacting to high inflation and don’t want to lose their staff to other companies. She’s lucky and works for a good company in the private sector so they didn’t have to fight to get a decent increase. But even workers in the public sector like myself are likely to get above average wage increases this year.
Her mortgage costs will stay the same for 3 years so suddenly that feels more affordable. It’s like her mortgage just became 12% cheaper in 7 months.

@Mark19735 -you seem to be assuming that wage inflation will follow CPI inflation as it did in the 1970s. That's not happened so far for various reasons. Sure, wages are rising faster than before (on average) but they are also far behind general inflation and we tax increases plus more next year AND you haven't taken the rise in interest rates into account or increased unemployment that will happen next year as we have high inflation and a recession.

"even workers in the public sector like myself are likely to get above average wage increases this year."

Eh? Can you put that in English? What is an 'average' price increase? Are you suggesting that workers in the public sector are getting pay rises that equate to the cost of inflation?! If so, you might like to tell all those public sector workers on strike that they don't need to do this, as they are actually getting pay rises of 11%+. Certainly doesn't apply to me or anyone where I work - as a public sector worker where I work, pay rises are all in the region of 2-3% - so in real terms, we are all losing real income and the amount we can afford to spend on housing is lower than last year, not higher.

"Her mortgage costs will stay the same for 3 years so suddenly that feels more affordable. It’s like her mortgage just became 12% cheaper in 7 months."

Yes, but your daughter is not buying or selling, so will not impact on house price indices. People who are buying however will not all be earning 12% more (that's about double the average pay rise), while they will be spending 11% more (based on current inflation rates) on everyday costs not including housing. Then when you factor in that their costs to take out a mortgage will have gone up by about 30% in the last few months, and it's fairly clear that anyone selling hoping to sell for the same amount they would have sold for in May 2022 is living in cloud cuckoo land.

To be put figures on that. Let's say you wanted to buy a property of 300K. You have a deposit of 20%, so want to borrow 240K. In May, your monthly mortgage costs on a 2 year fixed rate at 2% would have cost you £1017. In Dec 2022, borrowing the same amount at a rate of 6% would now cost you £1546 a month.

Now even if your salary has gone up by a few hundred pounds in that time, your other expenses eg fuel, food have also gone up, entirely eating up any raise. Where is the extra £500/month to pay for the increase in mortgage costs coming from? And while your daughter won't be selling, who is going to be paying over the odds for your daughter's neighbour's house, when they sell?

I feel sorry for your daughter, for buying at the peak of the market, but as you say she can afford it, then she may be OK. However, for anyone who needs to sell at the moment, they are not going to be able to find anyone who can get an equivalent mortgage to the one she bought with. And cash buyers aren't going to pay thousands of pounds over the odds just for fun.

I work in a school and we normally get about 2 or 3% increase. This year we have already been offered 5% so that is already an above average offer for us. Nevertheless our teaching unions haven’t accepted it and we will very likely strike unless we get more. I don’t know what we will end up with in the end but that’s what I mean about we will get an “above average” wage increase this year. Maybe not compared to inflation but definitely above average in percentage terms whereas for those on fixed term mortgages (most people these days) the mortgage amount remains the same.

www.propertylog.net/

PropertyLion should also be on your list if you want to see what is really going on, away from the media (and mortgage debt holders on forums) spin.

People getting a small wage increase to put towards their existing mortgage debt doesn`t really help the property bubble much though, that needs new borrowers to pick up FTB type property and keep chains going, those new borrowers have seen their potential mortgage costs dramatically increase, many will stay away from the market now until it crashes.

You seem to be conflating volumes with prices. No one is denying that sales volumes will fall off a cliff and the whole market will grind to a near-halt.

But prices won't fall by much to counterbalance that. That is because each current owner has a floor price below which they are better off staying put. That price is linked to (although not determined by) the cost of renting that same property.

In some, exceptional circumstances - perhaps where a job opportunity is just too good to pass up, or due to some trauma - an owner will sell for much less than than was previously paid. This is a tiny, tiny fraction of the total sales each year - and has been a constant factor operating in the background for 30 years.

The thing is - losing money by selling a house for less than you paid is really expensive. Why would anyone take the hit now and front-load those losses? Far, far better to let wage inflation outstrip house price inflation and to delay moving by a year, or two, or three and sell for what you believe it is worth today but in the future. In practice - that's what actually happens.

You do understand that houses have lost perceived ‘value’ in the past, in times of high interest rates (like in the 80/90s when people were posting keys through estate agents letterboxes don’t you?

You do realise that these factors are already causing prices to drop in other western economies? (Brexit perhaps)

www.bloomberg.com/news/articles/2022-12-08/swedish-housing-market-outlook-worsens-as-prices-drop

beta.ctvnews.ca/national/business/2022/12/22/1_6203875.amp.html

7news.com.au/business/housing/home-prices-continue-to-drop-but-at-slower-rate---as-expert-warns-of-borrowing-power-c-9024737.amp

In recessions people lose jobs, and affordability becomes increasingly restrictive. People have to sell and negative equity is real, it’s not just a case of choosing not to. Market forces dictate prices not people’s opinions.

Yes, I do realise that what is lost is merely the perception of value. What is much more rarely lost is actual money. I think I've posted previously that in a nation of millions, there will undoubtedly be hundreds, maybe thousands of anecdotal instances where those rare events have actually happened to people ... but that doesn't change the fact that it is a tiny fraction of a percent of houses that actually sell for less than the owner paid for it.

We are talking about house prices falls in aggregate not how many owners will sell for less than they paid (again, you leave out inflation entirely).
House prices have already fallen in aggregate. The market has fallen and will continue to fall.
Hopefully not too many people will be forced to sell and lose significant amounts of money but that doesn't detract from the fact that house prices are falling.

Well, you just buy yourself an aggregate house at an aggregate price then. And satisfy yourself that it is cheaper than some magic number you read on the internet yesterday, and that you forced the imaginary seller to accept a lower price because of your greater economic wisdom.

Meanwhile, I'll sit in my actual house, bought at an actual price, for actual money, in a real transaction with a seller, and one which had absolutely nothing to do with what someone on the internet thought some other houses in the same street ought to be worth.

'Well, you just buy yourself an aggregate house at an aggregate price then. And satisfy yourself that it is cheaper than some magic number you read on the internet yesterday, and that you forced the imaginary seller to accept a lower price because of your greater economic wisdom.'

It's pretty easy to check recent sold prices or to track right move or any other property related site. No need for imaginary anything.
I have no idea why you keep talking about your house. No one on here wants to buy it.