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.

There are less mortgage approvals because less people are applying for mortgages ATM, with interest rates higher than before. I don't think house prices will crash. They may go down a little or just remain stagnant for a year or so. There is generally a shortage of houses in UK so in the long term house prices will rise again. There are far less rentals on the market than there used to be so more people will try to buy. Inflation is finally getting lower and by the end of the summer I think mortgage rates will stop rising and by Xmas will begin to decline again.

Demand correlates with availability of credit. nothing more, nothing less x

No tomatoes? I buy tomatoes every week.

I'm a homeowner and hope it crashes, otherwise younger people will end up with no chance of owning.

I can remember black Wednesday when several stockbrokers took their own lives. Thank goodness we are no longer in the ERM.

Well done on saving so much! But i think it's fair to say that you and in particular your colleague are very much exceptions.

Or is it very common for immigrants to arrive with stacks of cash and getting very well paid jobs straight away?

Well done on saving so much! But i think it's fair to say that you and in particular your colleague are very much the exceptions.

Or is it common for immigrants to arrive with stacks of cash and getting very well paid jobs straight away?

My colleague is from Hongkong. He told me he has invested in the stock market from a young age and he worked in banking in HK. He sold his flat in HK. I didn't get a well paid job from the start and neither did DH (who is British). DH's first job paid like £24k in 2016, but was £30-35k with overtime. My first job paid £18k in 2016 (and I didn't have much choice as I was waiting for my visa but was allowed to work in the interim). I slowly got better paying jobs and DH worked overtime in his first job and then jumped to a bank in 2017/2018 which paid better. We were earning combined £75k in 2019 when we bought. we saved a lot because we lived with family but tbh at that time, there were rooms for £500 in east london and there are many new professional immigrant couples who lived in cramped conditions in order to save to send money home and buy a house/land (either here or back home depending on plans). Earnings are a lot more now in many professional jobs so it is entirely possible to live modestly and save money. Not as much as we did due to inflation and rising rents but more than you think.

I think that exceptional account goes to show what's necessary to buy property in UK, ergo the vast majority will not be so fortunate and will be lucky to find rented accommodation, exacerbating the pressure on that market, but not significantly effecting the sales market

The FT had an article about Hong Kong residents buying in suburbs of Manchester recently - I think Boris J allowed 250,000 to come here although of course not all those have come. A lot of them come because of human rights issues in China etc and for UK schools and DO buy properties. I live in an area of London with a lot of Indians and they definitely do buy properties even first generation immigrants sometimes with family money. however I agree that plenty of immigrants do not have the funds or means to buy immediately

We have 18m more people here than when I was born and I doubt the UK has built enough houses for them all so we are in a bit of a mess fo rhousing at present particularly as people are not happy to live as they were years ago (my granny grew up in a 2 up 2 down terraced mining cottage near Sunderland where parents and TEN children lived. I am certainly not recommending going back to that but that was one way we could fit people in the much older days and one reason today there is much more pressure on housing including more people being able to afford to live alone.

Anyone here claiming to work in property and that it's 'busy' is either a complete outlier, or just a lair.

The direction of travel speaks for itself. Transactions are now 32% lower than april 22 and 29% lower than march 23.

And now 800 deals have been pulled, so it'll get a lot worse. The message that this is sending is don't over leverage and wait to buy if you can...

Or lives in a different place to you...

More normal than it used to be. For several years now the U.K. Gov has emphasised only issuing visas to highly skilled & qualified immigrants in sectors we need to grow or can't staff locally, who earn over a minimum threshold and can pay a big visa fee & NHS surcharge. That tends to attract a certain type of immigrant. (Not fruit pickers, not here for benefits, and definitely not pushing down wages.)

There is a gap between how quickly we can home grow people to to fill those experienced roles and when the economy needs them filled.

I never understand the logic of comments like this. You understand that the market only crashes if nobody can afford to buy?

It doesn't matter whether the average house price is 50k or 500k - only the better off half will be able to buy.

Lowering house prices doesn't allow more young people to get on the ladder because it doesn't increase supply. In fact, it increases the chances that houses will be bought by investors with cash, rather than FTB.

Generally though, I think that the market is highly unlikely to crash. I think that it may dip a bit, but ultimately we are more likely to end up with a frozen housing market

www.jrf.org.uk/press/frozen-housing-market-faces-%E2%80%98worst-all-worlds%E2%80%99-downturn-unless-government-acts-now

It crashes when people stop buying at those prices because they can't get mortgages based on the income multiple. At some point , in theory, a crash would align prices more closely with affordability, but yes, obviously the continued lack of supply may scupper that.

Don't believe the doomsayers. My neighbours have to sell (marriage implosion) and they were offered the full asking price by 4 buyers so it's ended up going for 14% over original asking price (£500k) there are still plenty of buyers if the property is desirable

I'm going to look at the data from official sources rather than believing anecdotes from mn randoms.

A lot has happened since that article in February

More up to date...

https://www.thetimes.co.uk/money-mentor/article/down-valuations-on-the-rise-what-to-do-if-it-happens-to-you/

https://propertyindustryeye.com/house-prices-continue-to-fall-as-buy-to-let-landlords-exit-the-market/

And once rates do start to reduces around 2025 there's this whammy:

https://www.telegraph.co.uk/business/2023/05/13/house-prices-property-market-supply-baby-boomers/

Good call! These forums are littered with EAs trying to talk up the market (aka lying) looking for something to fill their time now that demand has vanished

Is it not the case that a lot of estate agents are also landlords? That means they can compensate themselves for the lack of revenue from house sales by putting up rents!

West Mids here. Both a family member and a work colleague have been trying to sell for months. Both have sold over the past month (after reducing asking price) but chains collapsed (FM twice). FM circumstances are desperate, and this week he has received an offer from cash buyer but for 15% under reduced asking price. He is reluctantly going to accept as can't wait any longer (will lose onward purchase) and doesnt want to be in another chain....

My situation was not your situation. I was replying to someone else not you in my original comment so don’t know who you are thinking my situation in the early 90s is relevant to yours today 🤷🏼‍♀️

Sorry about that, I thought it was directed at me!

You really think that?

@MinnieMountain isn't an EA.

If that were the case, why wouldn't an EA spend time trying to convince sellers to be more realistic with prices? Selling price 10% one way or the other doesn't make a great deal of difference to EA income. Transaction volume is the key part.