House Prices

[LGBirmingham]

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

We’re renters who bring home solid 10k after tax a month. And our rent is circa 1.6k a month for two bed flat in zone 3. Despite us having a very nice lifestyle that includes luxury car, clothes and regular holidays we save quite a lot at the moment and have a very good interest paid into our savings pot. Circa £800 a month.

For us to buy equivalent flat with 90% mortgage would cost 2.5k a month. And out of 2.5k payment, majority of it is interest, which has no chance to be offset with equity gains in next 2 years.

But to answer everyone’s question are we all broke, no we’re not. We just don’t want to put our cash into the houses of sad quality (majority on the market at the moment are either overpriced houses in need of gutting out or people who bought at boom trying to sell for what they’ve bought it). So a lot of chancers. We’re certainly not looking for an investment, and it’s clear as a day we will loose some money in the purchasing and maintenance process once we find a property. However, we are simply looking for home we like and being fussy, because we can be.

Ladder concept works for people with very average needs and lifestyle, more likely small career prospects, low saving abilities. And yes the price will go up and down in booms and grow with inflation. And some got lucky by simply sheer luck in the past. However, people who are buying now and overpaying massively will not win any time soon, unless they’re happy to bank on living in a rough area which might get gentrified in the next 10 years.

A North-South divide has emerged in the housing market as property prices are hit by higher borrowing costs.

As investors bet interest rates could start to fall by the spring as inflation cools, figures from the Office for National Statistics showed the average house price fell 0.1 per cent in the 12 months to September.

The report showed prices in the North and Midlands are still rising while they are falling across the South. The biggest increase in England came in the North East where prices were up 1.6 per cent in the 12 months to September. They were also higher in the North West, West Midlands and East Midlands while there was no change in Yorkshire and The Humber.

By contrast, they fell 1.6 per cent in the South West and 1.4 per cent in both the East and South East. In London, they were down 1.1 per cent. In Wales, prices fell even more sharply, by 2.7 per cent, while in Scotland there was a 2.5 per cent rise.

North-South divide opens up in the housing market as property prices are hit by higher borrowing costs (msn.com)

Something is definitely happening....

https://www.bbc.co.uk/news/uk-england-derbyshire-66786286

"It is estimated, as well as the core jobs, the factory also supports 1,400 supply chain companies employing about 17,000 people."

Definitely not good for house prices! They could have popped this bubble with higher rates earlier instead of waiting until their hand was forced by the markets, so many people will now have big mortgage debt from the low rate era and will be facing redundancy and negative equity in many cases.

Walmart calling deflation in the U.S today due to a collapse in consumer spending over the last 90 days, at least they had the decency to say that "deflation is good for our customers". Might not be good for jobs and house prices though?

Deflation isn't really good for customers though, at least not the majority. As the economy shrinks, more people become unemployed, wages drop, etc so customers are less able to afford the deflated prices.
The US economy only appears to be growing because of the massive deficit spending. If that and all the other stimulus checks hadn't been handed out, the 'growth' would look very different.

MSM and system of course

The figures quoted above aren’t accounting for inflation are they?

If you can keep your job it`s good, and if you have a large cash pile instead of debt it is pretty good? Of course serious deflation will see rate cuts and debt will cost less, but I think stagflation will be talked about more and more TBH, there are too many potential "outside shocks" around to put inflation safely to bed.

I think that's fair, yes!

@Wanderergirl We're in a similar situation to you except outside London. We get to rent a large flat (similar square footage to a terraced house) in a city centre with lots of amenities on our doorstep. Save 30-50% of our wages each month and still get to go on nice holidays, eat at high end restaurants. I'm sure people see our lifestyle and think we are throwing our money away and that's why we don't own. It's just that all the houses around are underwhelming and not value for money. We're looking to buy on a single salary but even if we double our budget there is just nothing we'd want to buy. The houses are all the same, it's just that some areas are more expensive than others. The truly special and unique houses are few and far between, which is why all these people looking for a unicorn buyer are being ridiculous. You don't get one of those unless you have a unicorn house.

DP is from an ex-industrial town up north where houses are very cheap. His friends never moved away and bought their first house for £130k in 2016. They've since bought and sold a few times. Have a lot more debt but not much more house. DP chose to prioritise his career and moved to London. They know we earn significantly more than them because they are nosy and always ask. We are considering moving up north and they keep sending us houses that are the same price they paid for their first home (and much smaller considering price rises). There is no malice behind it but they genuinely believe that we must be starting in the same position as they did because we are still renting. The fact that there is an alternative path to getting a house and renting isn't sucking up all our income doesn't occur to them. They also seemed weirdly preoccupied with the fact that their mortgage payments have gone up but our rent hasn't.

Story of my life! People can’t seem to grasp that cheap rent and regular savings will allow you to skip at least two steps of the ladder. Because the money they have locked up in their house equity are sitting in my bank account.

As I mentioned before, they might got lucky to be in places like Clapham before it went through gentrification, so made gains. But so did I on the market when it crashed during covid. It’s all a gamble. The reasons why some people can’t afford the houses they live in is: gentrification, slip in earnings compared to their younger days (very common to blue collar workers). There’s no magic there unfortunately.

A lot of people can afford their million pound houses in their retirement, because they didn’t win them in gentrification lottery. Never heard CFO saying they can’t afford house they live in, because surprise surprise, they can.

I can’t imagine going through 3-5 chains of UK house buying. Most people spend so much money in the process, plus stamp duty etc. But their math skills go as far as rent = bad, mortgage = good, and no other calculations above this.

@Wanderergirl I think the affordability getting so out of sync with earnings is evident in all of the people so unwilling to reduce their house price by a meaningful amount. I've seen so many people putting their homes for sale at very high prices but then saying a £10k, £20k, even £50k reduction is "massive" when it's actually a tiny percentage of the asking price.

If you actually have the salary (or savings/investments) to match your house price rather than all the equity being due to gentrification/house price inflation you wouldn't think those numbers are "massive". They are proportional to the price.

It is, but these things always correct themselves sooner or later. Lower demand drives prices down, and if high activity, it would mean more wage increases etc to match it. At the moment property market seems to be a bit behind from other markets. But it’s probably amalgamation of estate agents trying to win business and buyers who think that someone will be up for paying 4-5k a month for drafty Victorian terrace. There’s simply not enough people who can afford to take on such a high expense, but houses everywhere across London seem to be a couple of months behind from reality.

My house is worth .......

https://propertyindustryeye.com/home-values-significantly-overestimated-by-owners/

London mid-market house (1.5 to 2m), anything refurbished is shifting quickly, anything requiring modernisation is sitting there reduction after reduction. With increased building cost over the last 3 years, it seems people have finally realised those aged houses are going to cost much more than the already done job. Suspect building and renovation industry won’t be very busy in 2024

I think it’s quite a mindset shift tbh. It’s one thing to have a 1m house because of equity gains it’s quite enough to have to actually pay for it. And it’s a different story when interest rates are not super low. Even if you can afford it getting your head around the fact you are paying thousands more just in interest is not appealing. It makes complete sense in this economic climate to skip stages.

It won’t; if you’d look at all the economists forecasts, building industry is having a downturn in activity and in wages growth at the same time. It’s like 2008 repeating itself.

It’s actually very different from the GFC. No massive job loss so far, and certainly not a 15% house price decrease like in 2009. It might play out over the next 12m but it’s nothing short of incredible that market has been that resilient so far. Brexit, Covid, interest rate, poor economic outputs, yet, prices have picked up significantly since 2019 for that market at least. With interest rate pointing south, we may well escape all together a negative price cycle other than few percent at the margin.

You’re quoting overall data, I was talking about building/construction industry. So your argument is not related to what I said. Construction industry was hit very hard in 2008 and it will be now, it actually is already m. No one’s building and no one’s renovating, but few.

Some industries will continue to do well, supermarket, energy sector. Maybe read more recent news? It’s so simple, people will spend most of their money on energy, housing and food. So redundancies and unemployment will be unavoidable.

and certainly not a 15% house price decrease like in 2009.

What the price decrease accounting for inflation though?

Seems prices actually are still rising in Brum then. Must be all the Londoners moving in.

I think you may have misinterpreted the figures. These are annual figures. It is possible, likely at present, for annual figures to still show a small increase still but for monthly figures (ie up to date prices) to be falling every/most months. For example, if the annual rise in Sept 21-22 in your area was, say 12% and you then have had monthly falls from, say December 22, you can still have a positive annual growth Sept 22-23 but a falling market and falling prices. Hope that makes sense.

I agree with @Wanderergirl here, @Porkepic : 'people will spend most of their money on energy, housing and food. So redundancies and unemployment will be unavoidable.'

You are looking in a v high end market so the potential buyers are likely to have v high incomes plus probably equity+/- family £ gifts. These sort of buyers won't be affected as quickly as the rest of the population, until some of them lose their jobs, at least. In aggregate, a shrinking economy is inevitable.

reports of next years house falls won’t come through as real data till late 2025 at least.
your comment makes zero allowances for how delayed it all happens. You’ll see

Very similar situation here @Wanderergirl. Average 10k joint income after tax and we live in a small flat with very cheap rent sub £800 rent. The houses we were looking to buy 2 years ago with low interest rates had mortgage repayments of £1,400, now we are looking at £2,300, with 20% deposit. The houses are coming down slightly but by very small 10k or 15k amounts, plus they are also of poor quality. I see a lot of listings where owners are trying to get £100k-£200k of gains over the past few years with little or no renovations.