Will The Housing Crash Be More Devastating Than The Early 90s?

[TonyTeacake]

It looks like mortgages approvals have falling off a cliff from last summer.

Morgage Approvals
Aug 22 = 74443
Sep 22 = 66785
Oct 22 = 58018
Nov 22 = 46112
Dec 22 = 35612

You can see from the interest rate chart the rise in interest rates for mortgages has hampered affordability for most people.

The pendulum has now swung from a sellers to buyer's market. With 8% of the market being cash buyers this won't be enough to stop property prices from going down further as there isn't enough demand due to mortgage approvals falling substantially and there is so much more stock coming on the market with not enough buyers. Lower affordability means one thing house prices have to come down much further. Supply is now outstripping demand.
You can see this chart by RICS Chart: New Buyer Enquiries & New Vendor Instructions.

Also if we look at average wages they are not keeping up with inflation which you can see in the chart below.

To sum it up with inflation proving to be sticky we can expect more interest rate hikes this year which is only going to affect the affordability of people buying houses even more. It looks like this crash has already started and I expect YOY average drops for 2023 to be around 10-15% with further drops going into 2024.

Please share your thoughts.

More proof for the pudding, now with bbc front paging house prices falling. That means they've accepted this narrative and that's going to accelerate falls with mass awareness. The vested interests are going to look increasingly out of sync, incredulous and down right dodgy now when trying talk this market up.

I know they have a job to do and it's their livelihoods. But their livelihoods shouldn't be at the cost of other peoples'. There's a point at which sales crosses a line into grifting marks into losing money

They will be partying hard over on the HPC forum 🥂🍾

I'm baffled that people think houses wouldn't fall! Interest rates make a difference!

I think the party is spilling out, and they're trying out some different venues...!

and also littered with trolls from the house price crash forum preaching how much house prices are going to crash (they've only been saying this for 20 or so years!)

Where I live it’s been like this since Christmas really. I bought a reasonable bargain part exchange property in March. I’ve bought in the knowledge that the value of the property is probably going to go down but it would have to go down significantly to be leave me in a worse position than I would’ve been renting for another two years with high inflationary increases built in.

New house is larger and nicer to live in. Plus I can do what I want to it.

I recently spent some time reading through the threads over there after it was mentioned here. Much as it pains me to admit it - I think some of what's predicted is likley to be correct this time. Goodness only knows though - how much some of the long term posters have missed out on. I don't just mean in terms of their catchphrase of "un-earned property market gains" but in terms of quality of life in rental accommodation, and the reality of just getting it wrong for so long.
Every dog has its day though, and at the moment it does look to me like their time in the in the sun might be coming. I hope they saved as hard as they make out they do - to take advantage. But I bet many on that site haven't, and will be just as property poor in the future, with added extra bitterness.

With transactions on a downwards trend, some stimulus is needed to encourage sellers to come to market, and downsizers in particular.
"With a general election in 18 months’ time, it would be a good way for the government to boost the economy and get the property market thriving once more."

The next generation of Tories are going to be those who need their parents house is sold in order to continue being Tories, ie delusional Twats that think that they have been very clever and that’s how they have accumulated their money.

@DrySherry

Surely they don’t think they will be “right”? If they are saying “it’s fine I didn’t buy in 2010 because there’s going to be a massive crash in 23/24” then that crash would have to be colossal, like probably 60/70% down. Which is just impossible.

Say house prices have increased 100% in those 13/14 years and they didn’t buy the £200k property that’s now worth £400k. That’s £200k plus rent. So probably £350-400k. So actually they’d need close to a 100% crash!

Dont ruin their fun with facts and logic 🤣

Exactly, I think you have to filter out the extremists and their predictions - they have lost out which ever way you look at it and yet are still hoping for the impossible. However I also read some pretty level headed, logical assessments and arguments of a moderate correction. Which is also a distinct possibility in my opinion, and seems to becoming more likely at the moment.

There is a cohort of people who have been waiting for prices to fall for decades and never bought, kicking themselves. Hoping for a crash may make them feel better but, it does at take away from the facts. Net migration stands at an all time high, Housebuilding almost at an all time low. Too many people, too few houses. Keeps prices high.

People think that having cash puts them in a good position to negotiate where is actually it doesn’t make any tangible difference to the person selling the house usually. I genuinely couldn’t care less, whether the money is withdrawn from a cashpoint and handed over in used fivers, or whether it comes from a bank in the form of a mortgage. The time frames will be similar. And it’s a risk I’m willing to take if somebody comes to me with proof of funds, i.e. mortgage in principle and proof of deposit versus dropping my house by 10%. I honestly cannot think of many scenarios where a cash buyer would make any difference because it does not speed up the process these days with all of the money laundering checks.

As for the availability of lending, see my post above, the government are gonna kick the banks arses and get them lending as they’ve done many many times before.

Cash buyers are usually quicker than people in a chain though

Assuming theres a chain. Ive never been in one and would pay more to avoid one

Well obviously but many buyers are in a chain but cash buyers often aren't.

I'm a cash buyer but am not willing to overpay because of it. I'll be sitting tight to see what happens, only looking at houses priced realistically, putting in offers. I'm sure I'm not alone in that. Even corporate buyers and foreign investors won't overpay. So I never know why people expect cash buyers to prop the market up. You'd need cash buyers who were also stupid and happy to pay ££ more than necessary.

And I have a family member who is an EA - many people accept lower offers from cash buyers as there is no chain and the sale is more likely to go ahead, even more desirable in a falling market when you really want your sale to complete quickly.

People confused cash buyers though.

Some people mean people who literally have all the cash in their bank ready to go, and some people include FTBs with mortgages.

A discount is negotiable for both as they are chain starters, but pure cash is only marginally better than a FTB with a mortgage, as a PP pointed out.

Oh ok so they are relying on stupid FTBs and stupid cash buyers to prop up the entire market because they're just so happy to buy they're not worried about falling prices or overspending unnecessarily?

And I would argue that a cash buyer is a lot better than a FTB as they are notoriously cautious about survey findings and are more sensitive to market changes. They're not going ahead if their job is at risk for example.

Interest rates have been on average approximately 6% for 300 years.
During the last 100 years (before that most rented) historically a mortgage has always approximately been around 4 times earnings.

It’s not too difficult to envisage that the ratio of affordability will revert somewhat to mean from the 10 times earnings it is currently. 2008 was the last time we had interest rates at 5% and the ratio was around 6 times. That is 40% reduction from current levels from peak to trough.

As I’ve said countless times on here, house prices are linked to the affordability and the ‘supply’ of credit not the ‘supply’ of houses. Very few of those migrating here would be in the position to take out mortgage loans so will have little effect on house prices.
BTR and pension funds will be the ones building and providing rental accommodation as landlords are increasingly being forced to sell up and withdraw from the market through government taxes/policy.