What if there just isn't another property boom coming? Everything frozen where I am

[livelaughlambada]

I know it's not possible, but I sort of wish all house sellers would collectively agree to knock 10% (or whatever it would take) off their asking price. It feels like loads of people know their houses aren't worth what they're asking, but won't drop because the house they want won't drop either. Feels like the whole market where we are (south west) has frozen solid. Also round us, there are SO many older people trying to downsize who've been told that their houses are worth X when there just aren't that many people with X to spend! And lots of these houses have been on for a year, and in some cases you can see the deteriorations, but they just won't accept the prices have dropped. I do think it's really interesting in that the 65+ generation have seen so many booms and busts that I don't think they can process that there may not be another boom coming -- as in I just don't think there are enough 30 and 40 something with X to spend. It all just feels a bit weird right now.

If there's one thing we don't need it's another boom any time soon. I say this as a homeowner with a good chunk of unearned equity.

I think it’s very area specific. In zones 4/5 SE London, houses under £500k seem to be selling well and fairly quickly. It’s the £500k + market and flats that are selling slowly here. Smaller Victorian terraces in my area have risen £100k in the past 5 years on average. Bought as first house homes by younger couples from owners as probate or older people downsizing or landlords offloading. Smartened up with nice doors in a trendy colour, shutters, renovated kitchens and bathrooms and makeover gardens.

I think a sustained price stagnation would be the least worst option - crashes are bad, but there is nothing wrong with prices just hovering for a good long time while wages catch up a bit - in a lot of countries that stagnation is the norm! It's not mandatory to have excoriating costs in relation to average incomes.

What worries me is how are all these NEETs going to be able to get homes of their own, or will they simply not? That's a bigger social worry.

In order for prices to crash you need forced sellers (e.g. repossessions). That’s what happened in 2008, but it’s less likely now due to better financial protections.

Instead, now you just get stalemate and nobody moves. Nobody in their right mind is going to significantly reduce if the property they are moving into isn’t also reduced. And given that this isn’t a reciprocal property swap, you can’t mutually agree a reduction with your buyer.

There are 5 million over 75 year-olds in the Uk. Don't want to be grim, but a lot of them will inevitably shuffle off or into care homes in the next 10 to 20 years. I guess that will add to the current fall in house prices.

Can I ask what you would advise a first time buyer to do? Buy or wait?

I often wonder why places like France (outside of Paris and the big cities anyway) don't seem to have huge booms and busts like here.

As a pastime (no intention of buying) I browse French and Spanish websites and prices don't seem to have moved in any way as fast as here. Apart from certain hotspots obv.

I also think there should be some consideration given to a Stamp Duty exemption if you meet certain criteria, over 65 for example (and add more), don't own or have an interest in any other residential property, can't sell within 10 years or clawback of SD will apply etc. You want to downsize? OK, go ahead no SD for you! That frees up a family size home for FTBs.

I obviously haven't thought it through at all, it's just an idea.

I would advise a first time buyer to buy from someone who will take an offer. Don't pay too much!

I take your point, but many of the boomer generation have already done so spectacularly well out of property that the idea of them being the ones to get a free pass on stamp duty on top of everything else seems a bit unfair.

I think price stagnation would be fine, but I'm not sure that's possible - in that asking prices round me are currently at 2022 levels, but nothing is selling and I reckon a lot of them are asking 20% too much. So what is the stagnation point? 2022 prices? Not possible, realistically.

I think a lot of people who say they will “wait it out “ are obviously doing so in the expectation that the economy will improve and therefore house prices will be more acceptable to those buying.
I’m afraid that’s not going to happen in the next decade at least and not without major changes to the country and economy.

I think house prices will stagnate for a good few years while inflation causes wages to catch up. The population might be increasing overall but the pool of people actually able to buy houses doesn’t seem to be. Houses are only worth what people will pay and now interest rates have corrected, that amount is more restricted.

That's also the impression I get, people who think they'll be able to achieve the asking price soon.

The correction is already happening. It’s starting in zone 1-2 London and with flats but it is impacting houses and it will ripple out.

The ever increasing prices were only sustainable because of low interest rates and because the boom in starter homes meant people have the equity to pay inflated prices. Now either people are skipping starter homes or haven’t made anything/have lost money on them so the don’t have the equity to move up.

The big question is will it be a gentle correction or a big crash? I think that depends a lot on global events. It feels like the stock market is also very overheated at the moment. A big bust there could have wide reaching consequences.

If you can afford it and you plan to stay in the property at least 5 years then buy it. No point in waiting for prices to hopefully fall if you're spending more on rent in the meantime and you could be building up some equity in the house. There hasn't been a massive drop in houses in a while and there may not be for a long time. But don't overstretch and you want to be able to stay in the house long enough that if the house prices fall for a couple of years, then you don't need to sell up and land yourself in negative equity
But house prices just aren't going to half in price one day, they may fall a bit but they may just not increase or you might hold out for so long that they rise and you can't afford it

Have we ever had such high house prices relative to salaries and interest rates as they are?

Affordability really does matter despite the arguments it’s driven only by demand.

So much of the property boom in the last few decades has been fuelled by equity gains but flats in many areas have stagnated and wages have stagnated for years.

I would say this is the new normal but many will struggle to adjust as they have only known ever increasing prices.

There isn't just one 'housing market' but hundreds across the country, and activity and pricing can vary significantly from one area to a next.

But, in my corner of Surrey I would estimate that in a lot of cases prices are back to 2018/2019 levels. All of the gains from the 1% interest rate, post covid era have gone, and there essentially hasn't been any price growth for 7 years.

I have long hoped house prices would drop because rent and mortgage prices are now so unaffordable for people on low incomes.

A long term drop in housing costs would gradually reduce the COL squeeze.

I feel for those it would put in negative equity, but at least they are housed and would continue paying mortgages at the same rate.

There was an article years ago in the FT about when the boomers die off there will be a glut of family homes at the market but not enough buyers which will depress prices. I didn’t pay much attention to it but it may turn out to be pretty accurate.

It’s also the cost of renovations & utilities.

Plus for some who can afford prices with higher interest payments they may prefer to put that money elsewhere as opposed to servicing debt on an asset that may not end being worth double etc in a decade.

High housing costs aren’t good for the economy.

@Mildura is that accounting for inflation? Either way that’s pretty wild.

Stamp duty won’t make much difference,not this time.

Possibly, but one older person can potentially provide generous house deposits for multiple grandchildren to get in the ladder. It’s widely reported that millennials are set to become the wealthiest generation ever, as property wealth gets unlocked.

Which is why house prices were historically so cheap then. Who knows if we'll ever see that again, houses were more expensive in the 70s and 80s and are more expensive now. Not sure what the market will sustain long term but this article is interesting (although turns into a 'invest in S&S at the end): 175 years of house data.

I’m not sure why the conversation is focused so much on it being older people who must reduce. They still need to move somewhere, and if the smaller property that they are moving into isn’t reduced, then it’s often not worth their while to move. Smaller houses tend to hold their value well because they are most in demand, both by first time buyers, and by people looking to downsize due to age, economic circumstances, or divorce.

True.
Maybe the boomers shuffling off will fuel house prices.
Nobody knows. It's unpredictable.