House prices

[Twiglets1]

Hi Guys, we got to the end of the last thread so need another one on this controversial topic!

And to respond to @CrashyTime I don't say "demand is strong" over and over again. In fact, I rarely comment on demand at all. My posts are more focussed on house prices and interest rates/mortgage rates.

And I don't deny economic "reality", I just don't exaggerate how bad the house price correction is likely to be. I have a running bet with @XVGN that property prices generally will fall about 5% in 2023 and another 5% in 2024 so I do believe prices are falling in most areas. Just nothing like the 30-35% crash predicted by some!

Yes @XVGN I did predict that property prices would fall on average 5% last year and 5% this year while you thought 10% both years so it looks like I’ll be winning that little bet as closer than you. However I may have been a bit too pessimistic ( for those who see property falls as a negative thing which is debatable of course). With the exception of London, house price falls have been lower than predicted & the property market is proving to be very resilient.

What I would never try to deny is that property prices increase over the long term. How could I when my first flat bought in London for 62k around 1990 is now worth about 450k? Glad I didn’t decide to rent all these years though in the short term, admittedly prices do fluctuate and in fact I sold that very same flat at a loss after 2 years for 60k. Shame I couldn’t have held onto it and benefited from how it performed in the longer term! But at least I did stay on the property ladder which has worked out pretty well I’m happy to report.

Just want to add @XVGN we ALL would like a better market for our youngsters but wishing something don’t make it so. We can’t change mortgage rates or house prices just by discussing them on here 🤷🏼‍♀️

If you read my earlier note you'll see that I also agreed that prices rise over time. I just think that it is important that people realise that you can be waiting an awful long time for prices to recover if you pay too much. I illustrated with an example. Do you disagree with that?

No @XVGN I don’t consider what happened to one house in Liverpool to be proof of anything. We don’t know anything about that house or the reasons behind the price fall - it could have structural defects for example. I do know it’s atypical & I could provide more typical examples of house prices rising in Liverpool over the years but what would be the point? We both know that example was picked because it’s atypical, I just don’t really understand why.

House prices can go down as well as up, we can agree on that. I wouldn’t advise someone to buy a property purely to make money on it because that can take years. Though I do believe ( as do you) that prices rise over time.

I never said proof. I just used it as a counter-example and claimed there are many more. - which there are.

Ultimately this is a bit of a rubbish argument. Someone says prices will be higher in 2030. Someone else says that may not be true and gives an example where people who overpaid had to wait much longer than 6 years for prices to recover. No one knows if prices on average will be higher in 2030 or not. They may be. They may not be.

Here. Average prices (for everyone - not just odd examples) overall took 7 years after 2006 to consistently recover. It can happen. And the more you pay then the longer it can take to recover.

7 years to recover is consistent in my mind with saying house prices rise and fall but always rise over time … it IS a bit of a rubbish argument I agree but no doubt we’ll continue it another day 😂

Another plug for houseprices.io. The most recent data from the Land Registry has been added. It's a fantastic way to see what your own market has been doing - area and home type.

https://houseprices.io/?q=shoreham

We're starting to see more home prices falling behind and some actually making real losses. In this snapshot I can see that someone who bought a new build flat in Shoreham took a large loss in order to sell. I read up the local news and discovered that that "luxury" block seems to have some flood and effluence issues. I also heard of the block in Greenwich that has been ordered to be demolished. The only saving grace there is the residents were renting rather than buying but they'll still be forced to find alternative accommodation. I want builders to be held to account for the rubbish they are building.

These dips are not really relevant in most cases , it’s the long term trajectory that matters. As I said earlier I think we all agree that houses will be worth more in 2030 than in 2020 and they will be worth more in 2040 than in 2030.

I keep looking at houseprices.io.
For my postcode (NOT London at all) there is literally no houses that fell in value if you look at nominal change. Half green/half orange otherwise.
All houses that were originally sold between 2015-2020 and changed owners last year went for more (nominal).
Yes, I know the difference between the nominal and real change but some houseprice crash people keep talking about prices going back to what they were back in 2003 and I see absolutely no indication of this.

It's supertanker time! Very few people will see actual losses given the nature of how infrequently they buy and sell, and their unwillingness to crystallise a loss.

We are gradually seeing more and more orange and a few more reds than previously. It's possible to look back through years of transactions to see the ebb and flow of greens and oranges and reds.

I'm on record as suggesting prices would fall 10% in 2023 and 2024. I'm probably a bit too extreme for 2023 (we won't know until July 2024) and have no idea about 2024.

As younger people lose jobs and return to live with parents this will get harder, they will also party less so double whammy for BTL/AirBnB. Real jitters emerging now as well about banks exposure to CRE.

Yes it’s Daily Mail click bait and of course Mail readers will love a positive house price story but nevertheless I found this an interesting read. Not saying it’s my opinion. It’s quite a bold statement too!

• British author, Fred Harrison, is famous for his 18-year property cycle theory
• He correctly forecast the last two house price crashes years in advance
• Now he is saying prices will rise by around 20% before a major crash in 2026

https://www.thisismoney.co.uk/money/mortgageshome/article-13084091/Man-forecast-two-property-slumps-says-house-prices-jump-20-falling-2026.html

If they rise that much it will be on absolutely tiny volumes. I think more likely is a big spike in inflation due to global geopolitical volatility, a U.S FED rate hike or two and a proper wipe out for UK property as the BOE have to sit on their hands with rates at 5%+ The banks will soon be forced by the bond markets (happening now) to stop their teaser rates debt sale designed to lure the vulnerable into mortgage debt at extreme peak prices.

It will always be a supply and demand issue

LOL, you are really winding us up now, people know that is B.S, just look at stats on Plumplot or similar to see that.

Wish I’d bought in Northern Ireland!
( jk)

This is a pretty good overview of the state of play. It gives some potential explanations for why prices have not decreased as much as some of us expected (cash, wealth, BOMAD, regional), and suggests that a steady state may just be stagnating prices - deflated by inflation. It posits that the major unknown for future moves will be the state of economy and unemployment.

Very interesting, thanks for posting. He does mention a lot of different reasons for what we are currently experiencing in the UK housing market perhaps best described as a period of stagnation or even low price growth depending on which metric you use. I appreciate that the house price growth some areas have experienced is still lower than inflation so not a growth in real terms. Though importantly, not much of a fall, either.

@Lm1981 will be pleased to note that this commentator does indeed list supply and demand as a factor to explain the resilience of the housing market. He points to the increasing need for more and more housing due to immigration but way too few new houses being built.

And of course the government is going to do what it can to buy the FTB vote at the next election with the unveiling of measures to appeal to them. Probably won't help the housing market in the long term but it will be a shot in the arm in the short term which is all they care about.

I'm thinking of things like the 99% mortgages for FTBs plus I read that they are likely to increase the Lifetime ISA (LISA) limit from 450k to 500k to make it more realistic for FTBs in London (will no doubt increase the price of 1 beds which coincidentally are often sold bang on 450k - if this increased limit comes in they will be able to go up to 500k) and also tweak it so there are fewer penalties.

https://metro.co.uk/2024/02/23/price-a-london-flat-actually-cheaper-2017-20326855/?ico=trending-post-strip_item_3

Hmm I've never really trusted Zoopla, Crashy. I'm more of a Rightmove gal and they say something different about the average price of flats in London which does seem more realistic to me: Last year most property sales in London involved flats which sold for on average £567,415.

https://www.rightmove.co.uk/house-prices-in-London.html

(maybe Zoopla was focussing on South London or something, Croydon brings the average down somewhat)

Article by Kate Andrews in the Telegraph today: Hunt is about to plunge Britain into a house price catastrophe

The Government has been considering plans for a 99% mortgage scheme that could be announced ahead of the March Budget. It is broadly agreed that the Conservative Party needs a big idea to address the UK’s chronic housing crisis. Let’s hope, for the sake of would-be homeowners everywhere, that this isn’t it.

The new mortgage scheme would be a more radical replacement for the Help to Buy scheme brought in by David Cameron and George Osborne. Under the new programme, first-time buyers would require just a 1% deposit, with banks encouraged to dish out high loan-to-value mortgages backed by government guarantees. In other words, it’s a scheme designed to water down the financial requirements for first-time buyers to secure a mortgage. What could possibly go wrong?

Industry experts are already piling in to point out the flaws in a scheme that would gloss over a potential buyer’s financial stability and ability to repay their mortgage. The economics are simple: raising demand without raising supply is going to drive up prices. This lesson should have been learned through the pitfalls of Help to Buy. That scheme allowed first-time buyers buying new-build homes to put down a 5pc deposit, with the government providing an equity loan worth up to 20pc (40pc in London). A House of Lords report from 2022 assessed that the overall effect of the scheme was to spend around £29bn on making houses in supply-constrained cities more expensive.

Successive Tory governments have failed to solve the problem, as they have all shied away from doing the one thing that would actually work: building more homes. Until housing supply is increased, the market will remain terribly distorted. There will be no room for meaningful price corrections. As I wrote last year, the fear mongering around a housing crash was always bound to fall flat (as it happened, no such predictions came true) – so long as housing supply remains limited, there isn’t going to be a correction to prices. But what’s stopping a crash is also stopping first-time buyers from getting on the housing ladder. There’s no gimmick or scheme that doesn’t involve building, that will fix this.

https://www.telegraph.co.uk/business/2024/02/24/hunt-is-about-to-plunge-britain-into-a-house-price-catastro/

"Croydon brings the average down somewhat"

Can`t have that can we? Should we just exclude areas if they are "bringing the average down" when we calculate averages? LOL, in a country where a lot of people wanted to ignore a democratic vote to leave the EU I suppose anything is possible!