House Prices

[LGBirmingham]

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

Yup that just isn’t the case anymore.

Crashy doesn’t realise, bless him.

Market here locally has had a bit of a surprise - a few houses again going for over asking price, bidding wars are back.

Strange time of year for it, but seems there's such a lack of nice houses on the market, the decent ones are in high demand.

Plenty of buyers, being (rightfully) picky but jumping on good ones.

Anything that needs work, or has awkward layout, etc is needing to be reduced by 2-5%.

Lack of lending regulation led to the first bubble and crash, then zero rates to prevent real price discovery after that crash led to too low rates for too long and the present mess where people can`t cope with rising rates as they borrowed far too much thinking rates could never rise. Relatively simple stuff really.

I explained in another post why the historical lack of regulation matters, and I have been telling you for ages that debt costs are only going one way meaning people are now heavily regulated in how much they can borrow for property, LOL.

KPMG just extended the period where it will freeze pay and is making redundancies as the economy is slowing down.

The autumn statement didn't really help either and even with the OBR numbers I can't see how this country will avoid a recession next year.

For house prices that will mean cheaper interest rates which might drive demand but paired with redundancies and higher uncertainty might increase supply by much more than we have seen so far leading to s further slide/drop in prices.

Anyone overpaying right now will have to dive through a few years to break even and the poor people who bought at the top of the market last year might need a decade to come back into some sensible ROI.

Unfortunately @CrashyTime I know literally nobody who’s spent their life living in a basement and being in a better position than “everyone else I know” who is either a) early 50s and now mortgage free or with a comparatively small mortgage with lots of equity OR even worst case scenario younger people with say £450k mortgages facing £900 extra a month mortgage for their next 2 year fix. Which whilst expensive and a squeeze for them us still cheaper than renting their £600k family home equivalent.

Did you miss my post from a couple of weeks ago after I spoke to our broker and one bank was offering us 50% more than anyone would lend us in May? The original lender upped it by 17%. No change in our finances. They will always find a way to lend more.

https://www.thisismoney.co.uk/money/mortgageshome/article-12779453/New-mortgage-lender-allows-buyers-borrow-six-times-income-fix-40-years-good-idea.html

I know, you’re always telling me stuff Crashy 🥴

It’s always going to be a supply and demand issue

I am currently paying 2650£ a month in rent in North East London for a 4 bed and will be paying 3900£ a month for our mortgage for a 4 bed in a similar area.

If it weren't for us having a baby and the rental laws being insane we wouldn't even buy and just keep our deposit in the stock market where our returns have been quite decent.

There is no 'real price' RE housing.

A property is worth what someone is willing to pay for it.

British home prices to dip again in 2024 but no crash expected: Reuters poll

British home prices will fall again in 2024 after dropping 4% this year as the Bank of England keeps interest rates higher for longer, eroding how much buyers can afford to borrow and deterring some from entering the market, a Reuters poll found.

Average home prices were expected to drop 4.0% this year and 2.0% next before rising 3.0% in 2025, medians in the Nov. 15-29 poll of 18 property market experts showed. In a poll published in September those forecasts were -4.0%, 0.0% and +3.3%. The most pessimistic forecaster for next year predicted a 7.5% drop while the most optimistic saw a 5.0% rebound.

The bulk of specialists who answered another question - 10 of 13 - said the proportion of homeowners to renters would increase.
"As well as security of tenure the attractions of being a first-time buyer in 2024 will increase as mortgage costs fall but rents continue to rise," said Ray Boulger at mortgage broker John Charcol.

Private rental prices rose 6.1% in the 12 months to October, the biggest annual increase since data collection started in 2016, data from the Office for National Statistics showed earlier this month.

British home prices to dip again in 2024 but no crash expected: Reuters poll (msn.com)

"A property is worth what someone is willing to pay for it."

As many are now finding out to their cost. I think a lot of people genuinely thought that a house went up in value in step with the length of time you stayed in it, LOL. Actually for many people a house is worth what their lender tells them it is worth.

Incorrect, the lender is only agreeing/disagreeing with the price the buyer has agreed with the seller.

I think a lot of people genuinely thought that a house went up in value in step with the length of time you stayed in it, LOL.

House values have historically risen significantly over time, across all areas.

House prices once fell for 70 years

The misconception that they only go up seems to be widely held and hard to dispel

They might rise again in the future, but it's not some inevitable fact of nature like people seem to think

Yes if you go back to the period 1845 -1911.

Society has changed an awful lot since then though. Fewer people at that time had any chance of buying their own home & expectations were different.

Even by 1911, 75% of people rented rather than owned their own house so it’s hardly a comparable situation to current times, is it?

Actually, falls lasted until the middle of the century and were followed by multiple major crashes in the following several decades.

Your point that there are some differences between now and then is a non sequitur. I did not say that these periods were identical or even that prices would definitely continue to fall (literally mooted the possibility of a future rise).

My point was simply that the adage that prices always rise is demonstrably false. It's irritating too, because whilst it's very hard to predict the future, it's easy to check the past.

Periods of unmitigated rises have actually been fairly short and/or recent, and our situation now is likewise different to those periods, with higher interest rates and inflation and a potential recession looming. Is there something about the current situation that necessitates future rises? If so please let me know what it is. Unlike some, I'm not wedded to the idea that prices will crash, I'm just struggling to see how it can be ruled out with any confidence

You mentioned that house prices once fell for 70 years.

I Googled it and found the source from this This is Money website entitled "What happened to house prices over the past 174 years - and why did they once spend 70 years getting cheaper?"

This article explained that they fell between 1845 to 1911. That is the only record I can find of house prices falling for (roughly) 70 years. Do you have another example or is this the 70 year period you were referring to?

https://www.thisismoney.co.uk/money/mortgageshome/article-7943741/House-prices-174-years-70-year-period-got-cheaper.htm

Thanks so much for including the graph, it illustrates my point really well. If you were to draw a spline (smoothed line of best fit to track long term changes) you would see things bottoming out mid century and in fact not rising in any consistent sustained way until quite late, around the 90s maybe. Long term rises are a recent phenomenon and not the norm historically, as can readily be observed.

Now, back to my question - what is it about the coming decades that will lead to inevitable prices rises? It's a genuine question, and there may be a good answer. I'm open to hearing it.

If this question is directed at me @ChickenChickenHen I've never said it's inevitable that prices will rise over the coming decades, though it is very likely in my opinion.
If it's not directed at me then someone else may choose to engage with your question.

Exactly. I've made the same point previously and been argued with by the 'house prices only ever rise' group.
The huge rises in house prices are recent, particularly in the last approx 40 years. There are reasons for that, also discussed previously.
Lots of older Brits comfort themselves that the value of their home is rising so it doesn't matter that wages have stagnated for many years and that the purchasing power of the £ has fallen dramatically in the last couple of generations and that their children can't buy a home without a large gift from themselves, etc
It's a mistake to assume that everything will remain the same as the last 40-50 years. That's very unlikely.

House prices edged up 0.2% last month amid "encouraging signs" that mortgage rates are starting to come down, the Nationwide has said.
The building society said financial markets estimated interest rates had peaked and would start to come down, easing affordability pressures. But its chief economist warned it would be unrealistic to expect a big drop in borrowing costs in the near future.

While prices have now risen for the past three months, Nationwide said property values in November were 2% lower than at the same point last year.
The building society's data is based on its own mortgage lending, so the figures do not include those who purchase homes with cash or buy-to-let deals. According to the latest official data, cash buyers account for more than a third of housing sales.

The average house price remains about £40,000 higher than at the height of Covid when demand in the market led to prices soaring, as people working from home sought more space and took advantage of a stamp duty holiday.

Robert Gardner, Nationwide's chief economist, said that the housing market was "holding up a little better than expected". He told the BBC's Today programme that financial markets thought interest rates had now peaked and would come down in the years ahead, which would in turn pull down longer-term rates that underpin mortgages.

"But because affordability is stretched I think it's unrealistic to think that's going to change significantly. Nobody is expecting a dramatic decline in mortgage rates," he added. Mr Gardner said the jobs market would prevent a significant fall in house prices, but admitted it was going to take time for incomes to outpace property price growth rates and affordability to improve.

https://www.bbc.co.uk/news/business-67587236

According to the Nationwide data, the nominal (actual average price paid) fell slightly October-November 2023. The figures that made the headlines are seasonally adjusted and may change, according to the link below.
See table at the top:
https://www.nationwidehousepriceindex.co.uk/reports/house-price-recovery-continued-in-november

Those waiting for a house price correction will be sorely disappointed. Time to accept that prices are what they are and if planning to buy go ahead - no point putting life on hold

Those hoping for a house price crash or collapse will be even more disappointed!