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.

The 2008/2009 property crash wasn't a big issue in comparison. I just waited it out and prices came back up

I would argue the economy never really recovered from 08. ultra low rates just boosted house prices.

I am SO SO hot right now - at the thought of an entire bungalow PAID off. I cannot possibly imagine. And a successful business with it? Just SO hot. Wish I knew Tony personally ……. Ooooh.

Tbh in my area of SW London prices stagnated after Brexit & it was covid that got things going again. I don't think flats particularly new builds ones have recovered. I saw a few sell for a similar price to what was paid for them a few years before. If you bought yrs ago it's not an issue.

Demand is large. I can't really see it crashing too much. Surely fewer people move in the run up to Christmas?

And your point is?

@TonyTeacake - Toddle off back to HPC and tell it to your mates. Or better still, use the search facility to search for mumsnet and bathe in the misogyny. Then ask yourself why you have not been welcomed here.

Better still - make a couple of posts calling out all the pricks on there for their ridiculous sexism ... let's see how long you last before you are banned by the sock-puppet admins who want to be free to continue their woman-hating without being held accountable.

I’m not the one who started the thread, Tony. You tell us what point you are making.

Property always varies according to areas and demand, we have rich investment bankers around here paying cash for houses....800k plus....and so little for sale so prices have not really dropped at all. Our area of east london is full of young couples with children with pots of cash all helped out by mum and dad etc.

And your point is?

these threads always go a bit mental

Ooh oooh I’ve got this. You are Si1 and I claim my five pounds.

You come across as a very angry person. Are you an Estate Agent or Property investor?

Who are you addressing?

I'm no expert but I wonder whether the fact that people are more likely to fix now will help. As I understand it, historically people weren't on fixed rates so their mortgage could become unaffordable literally over night? Hence more repossessions flooding in and being a landlord was 'easier'/more profitable?

Whereas now there are many people that are cushioned in their fix and have more time to work out how to afford it, a plan b etc? So rather than lots of people dealing with it at once, it's staggered?

As I say, I don't know whether this will make a massive difference overall, but it is a different scenario from the time period quoted if I've got my facts right!

yes more people are fixed then in the 90s

I'd be careful about making large conclusions from these stats. A huge amount has happened in the last 4 months. The fixed mortgage deals currently on offer are much more competitive compared with those immediately following Truss's speech/plans.

Personally I don't think there will really be a 'crash'. Mostly it will be a flatline in prices (sonreal terms reduction due to inflation/payrises), maybe some pullback to 2020 values, but nothing you will be able to point at.
Ultimately there are few too houses, and much money chasing them.

I do think in some cases being a landlord today could be harder especially if you are over-leveraged. Also, a mortgage rate of 5% is very high in the context of house prices today, while this may be lower than the 15% borrowers paid in the 1980s, higher property values and debt makes the current environment more tough.

I think 6/7% with todays prices have the same impact on income as the 15% did back then.

About time house prices dropped. They are far too high.

I would love to see prices drop. I don't really care what happens to the value of my house, and I would like buying to be achievable for the next generation.
But I just think that a crash is unlikely. A mixture of a drop/stagnation, sure, but the being a private tenant is such an awful, insecure experience that most people are always going to aspire to buy (unless legislation improved the situation for tenants)

rents are a travesty as is the lack of social housing.

Agreed. And the lack of security is awful. I would love to see that change

In my part of C London, lots coming on the market and sticking, particularly mansions flats with sky high service charges (which have seen hikes). Some prices are ridiculous, others more realistic. The latter are shifting, albeit slowly. It doesn’t feel like a crash is coming.

I would much rather see wages rise. More likely, more egalitarian and less damaging, than house prices dropping. The only thing it wouldn’t do is ‘punish’ those who bought during the last twenty years … but that’s purely the stuff of INCEL fantasies anyway.

the issue with wage rises which is whatt we need is how to fund the public sector. we have an ageing population & a shrinking income tax paying population. With the increased strain on the nhs & social care I'm not sure how you fund that & increased salaries. salaries need to catch up massively