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!

I don't know what inflation is running at in general, but perhaps the increase in house prices is actually below that? Which would be good as might give people's wages a chance to catch up? A stagnation really though rather than a crash.

Yes I agree it must hurt a lot at the moment to be renting, the pain of which isn't considered enough by those who like to focus exclusively on the risks of buying a property. I wouldn't deny there are some risks to home ownership but look at the alternative - it's not the best option for most people in the long term unless they really value the greater flexibility for personal reasons.

My position is that I think we are in a period of house price stagnation at the moment or a small drop in most places in real terms. Which I think is no bad thing.

Inflation rose to 2.2% today LG.

As this BBC article explains, A rise was widely predicted and is due to prices of gas and electricity falling by less than they did a year before. The increase is also less than many economists had expected.

The Bank of England expects inflation - which measures the rate at which prices rise - to go up to 2.75% in the coming months before falling below 2% next year.

Experts have been predicting further cuts this year, with investors now raising their bets that the Bank will opt for a cut in September. Sanjay Raja, chief UK economist at Deutsche Bank Research, said: "A September rate cut should no longer be off the table. And it’s entirely conceivable to think that we could get multiple more rate cuts this year."

However, Debapratim De, director of economic research at Deloitte, said the latest figures were "unlikely to materially alter the Bank's thinking on interest rates".

https://www.bbc.co.uk/news/articles/ceq59pqr9qxo

We were viewing properties today and more than one agent said that town we're selling in is still fast moving but the area were buying in is the slowest it's been for years.

The true rate of inflation is running a lot higher than the media want to admit, and therefore house prices are actually dropping in relation to that.

different people with different incomes and lifestyles experience different levels of inflation. People with low incomes that spend it all on fuel and food experience a much higher rate than others ina. Different position.

The trick is to get your income to outstrip inflation.

thats difficult in a backdrop environment of reduced liquidity and money supply.

It's true, I'm sure it's running higher than 2.something percent that @Twiglets1 quoted. I paid £2.35 for a cheese and onion pasty at Greg's the other day. To be fair it may have been 6 months ago I last bought one but I'm sure it cost more like £1.50.

It seems that houses are staying expensive but the cost of everything else is catching up with them. So comparatively houses don't seem as expensive.

We have to put into context though , other things may be going up faster e.g something that was £1.50 is now £2.50 however houses that were £290k are now £292k (example)

The rate of inflation is normally measured by the Consumer Prices Index (CPI), defined as the change in the prices of a basket of goods and services that are typically purchased by specific groups of households. As stated by numerous sources including the BBC one I quoted and the Office for National Statistics CPI rose by 2.2% in the 12 months to July 2024, up from 2.0% in June 2024.

However, It's true that there are other ways of measuring the rate of inflation - such as whether you include owner occupiers' housing or not. The ONS gives a more detailed breakdown on their website:

• The Consumer Prices Index including owner occupiers' housing costs (CPIH) rose by 3.1% in the 12 months to July 2024, up from 2.8% in June 2024.
• On a monthly basis, the level of CPIH was little changed in July 2024, compared with a fall of 0.3% in July 2023.
• The Consumer Prices Index (CPI) rose by 2.2% in the 12 months to July 2024, up from 2.0% in June 2024.
• On a monthly basis, CPI fell by 0.2% in July 2024, compared with a fall of 0.4% in July 2023.
• The largest upward contribution to the monthly change in both CPIH and CPI annual rates came from housing and household services where prices of gas and electricity fell by less than they did last year; the largest downward contribution came from restaurants and hotels, where prices of hotels fell this year having risen last year.
• Core CPIH (excluding energy, food, alcohol, and tobacco) rose by 4.1% in the 12 months to July 2024, down from 4.2% in June; the CPIH goods annual rate rose from negative 1.4% to negative 0.5%, while the CPIH services annual rate fell from 6.0% to 5.7%.
• Core CPI (excluding energy, food, alcohol and tobacco) rose by 3.3% in the 12 months to July 2024, down from 3.5% in June; the CPI goods annual rate rose from negative 1.4% to negative 0.6%, while the CPI services annual rate fell from 5.7% to 5.2%.

www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/july2024

Yeah I mean that’s the fucking point. 2xonions in Waitrose (I know Waitrose) but 2 fucking onions £1.40.

Plus ma favourite Estrella is up nearly 100% over 4 years.

its worse than were being told.

They're not just onions, they're Waitrose onions (sealing from the M&S advert).

I guess the basket of goods & services they use to work out CPI does not include Waitrose onions or Estrella lager.

I do agree that most of the things I buy also seem to have gone up more than 2.2% but that is the official UK rate of inflation.

@Farting DH had sown a whole bunch of onions but as it’s been so wet and our garden gets quite waterlogged, they’ve not come through! Gutted as onions are a ridiculous price as you say

With house prices now accepted to be rising , I wonder if they will beat saviles predictions of 20-25% in 5 years.

Yes, CPI inflation under measures experienced inflation of the majority significantly and the government (ONS) fiddle the figures every now and then to ensure that the figures look good. They switched between RPI and CPI years back because CPI readings are lower but still use RPI for things like student loan repayments.
I have to admit that I have noticed a couple of food items that have fallen in price but when you look at rises in mortgage payments, rent and service inflation, the figures are way above the 2% or so reported.

House prices are therefore falling more in real terms and also falling in most areas in nominal terms- again the official figures don't reflect this accurately.

Not possible for most people to ensure that their income outstrips inflation, especially as income rises have tailed off now. This is likely to continue through the rest of 24 and into 25.

No rational justification to still buy Estrella in our day and age.

No fuck em, I’m still buying Estrella, and I’ve put my prices up.

Im a strange eccentric beast that’s difficult to replace and the duckers can pay.

Zoopla House Price Index: August 2024

Key takeaways

• Over the first 7 months of 2024, house prices have risen by 1.4%.
• All areas of market activity are up year-on-year – the long-awaited base rate cut has not had a major impact so far
• Price inflation has improved across all regions of the UK. It remains slightly negative in southern England, but London’s positive at 0.2%
• 1 in 5 homes have had their asking price cut by 5% or more, an above-average level showing continued price sensitivity amongst buyers
• It takes 28 days to sell a home with no asking price reduction, but 73 days if you overprice and then need to reduce by 5% or more
• House prices are on track to be 2.5% higher over 2024 with 1.1m sales

Key takeaways seem to be that the anticipated 35% house price crash certain people predicted between 2022 to 2025 looks even crazier now than it did back then. And that if you want to sell your house fast don't overprice it, but I guess that's obvious. The harder thing is guessing its current value because that is hard to judge before getting a sale.

https://www.zoopla.co.uk/discover/property-news/house-price-index/

I'm surprised house prices stayed as resilient as they did with the interest rate hikes, I was anticipating a few % more in terms of value decrease but overall I think we were right to think there wasn't going to be a huge crash.

I'm not saying houses aren't a silly amount of money or that the market is fair, only that I didn't/don't see a significant downturn anytime soon.

Historically, value increases. This will only continue. The best time to buy is when you can afford to do so, irrelevant of 'value'.

Yes I agree with all that and feel the same way.

I completely agree too. I'm surprised but house prices just didn't seem to be dropping, which was why I started the original thread which this one carried on from.

Perhaps they have dropped a bit but not anywhere near enough for it to make life easier for anyone.

Very true @LGBirmingham

With high recession risks in the next 12 months, falls in assets are more likely now rather than less. A lot of the pandemic money has been spent now. Lots of other issues globally.
I've never given a prediction as to timing but the risks are certainly there.

'Historically, value increases. This will only continue. The best time to buy is when you can afford to do so, irrelevant of 'value'.'

When you say 'value', do you mean nominal price/ sticker price? Real value definitely doesn't always increase. Utility value is also unlikely to increase.
I've made this point several of times before but, if you are talking about £, real value is the one to watch because the currency can be devalued into hyperinflation and sticker price totally loses meaning.
I don't necessarily disagree with your second point- no point in holding out in the hope of a crash but it all depends on individual circumstances. I wouldn't recommend anyone stretching to the max or overpaying recently/ now.

I noticed stupidly overpriced properties had a reality check, and buyers held back a little, as well as being pickier (and why not). But all of the fear-grabbing headlines amounted to nothing.

I do hope not too many people in unsecured housing held off hoping for a significant drop.

I can see some sense in continuing to save if someone is in secure, low-cost housing though; it may not look to be dropping significantly but I don't see property prices dramatically increasing, either!

Perhaps entering a somewhat stagnant, slow-growth phase?

If we look back at every economic shock over the last 25 years yet still house prices are higher now than they were every 5 years during the last 25 (and more). That is proof to just how strong house prices are.

i totally agree that houses are expensive and it’s very hard on people who work hard , have honest jobs yet are stuck in a rent trap. What we need to do though is not kid ourselves , prices are not wildly dropping - it does no good to bury head in sand about these things.

i can’t offer any advice really to people who are stuck in rent trap but for those who can buy but are holding out for a big drop , if I where in your shoes I’d seriously think carefully.

Yes I think we are in a stagnant, slow growing phase now. Prices have fallen in real terms in some areas but not dramatically. In most areas however they are rising, though again not dramatically. This phase is overall better for society than when prices were rising quickly but property hasn’t become significantly cheaper. So the affordability issues remain, especially for first time buyers.

It wasn’t worth those in unsecured housing waiting for the housing market to collapse, and it still isn’t in my opinion. Though it’s no bad thing that buyers have become pickier & that overpriced properties are not selling until the owners become more realistic.

'Perhaps entering a somewhat stagnant, slow-growth phase?'

This is possible, though less likely imo. House prices stagnate for 10 years or so, while incomes slowly rise, so fall 30-40% in real terms but over a longer period. Some have predicted this scenario as the most likely.

@Lm1981 -again, the last 25 years is an anomaly and no proof of strong house prices. Indeed, between 2010-20, prices were stagnant in real terms (compared to inflation) but rose in comparison to wages.