House Prices

[LGBirmingham]

House prices still seem to be rising? Does anyone else think this?

This month's RICS report is hair-raising - especially given the spate of EA spelling errors.

"Richard Franklin MRICS, Tenbury Wells, Franklin Gallimore
Ltd., [email protected] - Lenders intransigence and nervousness appears to be a prompt for a speight of down valuations, where off-patch valuers quoting irrelevant comparables are being used to justify the tactic. Cash is King and cannot recommend mortgage free deals to clients enough in this market."

https://www.rics.org/news-insights/market-surveys/uk-residential-market-survey

https://www.bloomberg.com/news/articles/2023-08-30/uk-money-supply-stops-growing-in-a-possible-recession-warning?leadSource=uverify%20wall

Interest rates are having the desired effect, you are looking in the wrong place, house price stats on tiny volumes are just noise.

Wow this thread has really gone much further than the simple discussion as to whether house prices actually seem to still be rising in people's local areas that I started. It's interesting though.

@IBlinkThereforeIAm I've actually been wanting to start investing in the stock market for a while and nearly opened something last year but it just seemed a terrible time to invest and I bottled it. Our money got put in and cash isa each for a year instead.

Do you have any advice on how to start investing?

Probably the most accessible tuition comes from this guy. You'll only need one or two global funds and you're done! Regular saving through ups and downs does the rest. The telling information is that most "expert" stock pickers and fund managers do worse than just investing in everything.

https://www.youtube.com/@Pensioncraft

Also spread risk (traditionally people said a third in cash, a third in property, a third in shares and only put in anything that might go down money you can afford to lose) and don't take tips from people on the internet about investing. My son who lives at home has his house he lets out purely because his brother owned it and was moving, I planned to help the son buy a first property when he was older and I wanted to get that over with because I am getting older so it just made sense - no buying costs and let it out until he is ready to move in or sell it and let it tick over there so he also had a stake in the property market whether prices go up or down. Now we could have sold and put the money in various places but I am content with the letting out and it will just be for a few years as ultimately he will move out himself and live in it (as he brother did) or sell it and buy a different property. 40% tax on the rent (next tax year) of course removes a huge amount of his profit now he is no longer a student but I suppose at least the state is benefiting and can spend the money as wisely as it always does...[not]

Good reminder. Maximise your tax allowances - pension, ISA, etc - to avoid paying 40% tax to a profligate spending government.

Good advice @Xenia

This is negative for house prices. Recession is looming as insolvencies tend toward all time high. I'm guessing that many businesses that could survive when interest rates were low are now being exposed. The good news is that this is positive for strong businesses that can capitalise on the new customers.

https://tradingeconomics.com/united-kingdom/bankruptcies

The idea that a mortgage is renting a house from the bank is ridiculous and ignores the fact that ownership accrues monthly in a mortgage which is a highly protected and regulated form of borrowing. Rent for decades and you have nothing to show for it in comparison@CrashyTime. Every time I try to ignore this thread...
.

@IBlinkThereforeIAm re investing in shares. Profits can clearly be made or lost. Owning self selecting shares often more profitable as less taken in commission. Buying and selling incurs costs. The old fashioned approach is to get company annual accounts and read them in order to decide. Buy in industries and companies you understand and be careful about costs eroding profits

I can’t really see any benefit to renting over owning a house for majority of people

I can see the advantage of renting for young people who may be geographically mobile and want to be able to move easily for job opportunities.

But for older people I think there are more disadvantages than advantages to renting and it feels a lot more secure to own a home. Not everyone has the option to buy of course.

Over 6 million people claim universal credit. UC will pay towards your rent, but only loan you money towards paying the interest on your mortgage. So there's a possible 6 million people who are better off renting.

In a recession people would be better off renting. 1) if you lose your job you can claim UC as above. 2) average house prices only need to drop by less than 10% pa to drop more than you'd have paid in rent. 3) you can move more easily to find another job. 4) you don't have to worry about the big expenses like a new boiler or sorting the roof

Curious to hear from those who have chosen not to purchase a property but could afford one - how long have you been waiting for a crash? What % reduction would make you change your mind and purchase?

Do you think 'waiting for a crash' is actually just an excuse and you're intimidated by the commitment?

People have been waiting for a crash since I started thinking about buying property - around 2000 - and before, no doubt. And yes there have been downturns. Using the anecdata of “everyone I know” however (caveat - mostly London/southeast) all those who started buying property in their 20s/30s are now either mortgage free or able to downsize n their early 50s if need be to be mortgage free. And with the economy as it is, casual ageism as it is in terms of being able to guarantee continued flourishing career and salary increases post 50… this is a good thing.

Yes I’m sure if you’re incredibly financially savvy, have spare cash, know about investments, and have the time and risk-bearing ability to instead focus on investing, you could do better. But that isn’t most people, not least the portion of the population who might be vulnerable to needing UC.

When I met my exH in the early 2000s, he was earning 6 figures but too nervous to commit to buying a £65k one bedroom flat in Kennington because “maybe property crash”. We eventually bought a house together for c£400k and sold it ten years later leaving £800k equity. Post divorce he again was waiting for the post Brexit crash, then a crash due to Covid (mistake), and held off buying for 5 years during which time again overall property increased and he lost out.

This is interesting - regarding your first point, there is nothing advertised in my area of London that falls within the UC allowance for housing. In fact, the most modest 2 bed property available currently is £350 over and in my experience it's likely we would be rejected by the landlord / estate agent due to having DC. Places more suited to a family are around £700 above the UC allowance so as renters we don't feel we have the safety net you describe and wish we could save more in order to buy (rather than paying high rents) to have some security for our family. I wonder how widespread this is across the country but appreciate it's tangential to the OP and should probably start a new thread...

I inherited over £100k at the end of 2022, and am still renting whilst prices are dropping. I expect to buy somewhere next year.

The sale of the property I inherited from took 6 months longer than it should have due to EA not doing their job properly. However this has turned out to be fortunate as had it gone through earlier I may have bought at peak prices.

By the time the money was in my bank there was speculation that prices were going to drop. I found the moving home with Charlie YT it convinced me to hold on for a bit.

When I was looking last year I would have been lucky to buy a 2 bed 1st floor flat with a garden, now 2/3 bedroom houses are coming into my price range (and still not selling) but they're not quite in the area I want or they need way too much work. Once something comes up in the right area I'll go for it.

@ibelieveinmirrorballs

People have been waiting for a crash since I started thinking about buying property - around 2000 - and before, no doubt.

There should have been a "crash" after the banking disaster 2008 but the banks got bailed out and ultra low interest rates became normal.

I bought my first house in 1987 when I was 19, I've seen what a recession does. I've seen the sentiment change from property only ever goes up to no one wanting to buy anywhere. A friend was stuck in a studio flat with her boyfriend for over 5 years because they couldn't sell due to negative equity.

If you look there a lot of statistics which are saying we're at the beginning of a recession, how bad it'll be no-one knows for sure.

That's understandable - especially as the interest rate on your inheritance will be paying towards/all your rental costs.

I was thinking more towards those that have been purposefully waiting for years and years - I'm wondering about the mentality of wanting to be a home owner but 'waiting' and then spending years watching house prices rise and rise - convincing yourself you've done the right thing by waiting for a crash.

Renting is preferred by many. Not everyone wants to be tied down in 1 location and financially responsible for a property

"I've seen the sentiment change from property only ever goes up to no one wanting to buy anywhere."

And that is the very best time to buy if ever you get the opportunity - when everyone says it's a terrible idea.

That makes sense though; you're actively looking but waiting for the right house, rather than putting it off and not considering at all.

I am someone who is waiting. We moved to a new area last year as renters with a large deposit from an inheritance, with the intention of trying to buy straight away. However prices started to fall almost immediately, at which point I started to make more of an effort to understand the housing market and that has convinced me to hold out a bit longer, albeit monitoring the local market very carefully.

From what I understand, the market has been propped up in the last 20 years firstly by lax lending and then by extremely low interest rates and then tax breaks. The lax lending has now been regulated away, and the low interest rates can't happen because of inflation. If interest rates go right down again it will be because of a recession which will also hit house prices. The tax breaks can't happen because the government can't afford it any more.

I am not saying that there definitely will be a crash - it's obviously very hard to predict - but I am yet to hear a compelling argument that there won't. For example I keep seeing people claim that house prices only go up (in the longer term). This is clearly false. They went down consistently from the late 19th century to the mid 20th, for 70 years. The argument that there can't be a crash because "supply and demand" is also wrong. This should be obvious really - the housing market is very volatile whilst housing stock and population size changes very slowly. And demand does not equal the number of people who want houses, it's (also) determined by real wage growth and the availability of credit. Credit is now greatly reduced, and if we have a recession (quite plausible) then wages will inevitably be hit too.

I would prefer to buy than to rent. However in the last year we have gained money by renting - the houses we are interested have fallen in price by much more than our rent and we are now earning good interest on our deposit. The gains of waiting have been equivalent to a modest annual salary, so not trivial at all.

I've been monitoring the proportion of houses on Rightmove in my area that are unsold Vs sold, and in the last year this has more than doubled. I've also started monitoring the proportion of reduced houses and this has increased by 20% in three months. When these figures start to flatten out significantly (i.e. for a good few months consistently) I'll consider buying. I suspect this will be more than a year away, which is frustrating because I actually would like to get on with buying, but I genuinely can't justify it, financially, at the moment.