Do you think house prices will return to 2004 levels? Or, what percentage drops are you predicting?

[WideWebWitch]

What appears to be the house of our dreams is in the paper this week and we could afford it if we got the price down by 30%.

I know I've been banging on about expecting 30% drops by 2009 but if were to offer 30% under asking that would be what it was worth in 2004 (and current owners paid for it) according to Zoopla.

So, 30%, realistic or in my dreams?

[wombleprincess]

clam i meant it was unrealistic of waterwitch to put in an offer which matched the buyers purchasing price and expect it to be accepted. i dont expect sellers to be treated as charities. but someone isnt exactly going to jump into a scenario where they lose money are they?

[noddyholder]

womble there will be no choice for many The nationwide who have always said no more than single figure % drops have said today 25% off from peak which is why it seems many banks are requiring huge deposits.The sooner prices fall the sooner the banks will loosen lending again.They have said that this will leave 2.5 million in -ve equity which is shocking

[wombleprincess]

i dont disagree with you but realistically it the house has only gone on the market (as it has in this particular case) then i still hold that putting in a 20% below offer is unrealistic.

[Upwind]

womble - say the owners of WWW's house were not first time buyers on a 100%+ mortgage, they might not care that the market has gone back down to 2004 prices. They will be paying current prices for their next house, why should they care?

Plenty of sellers are realistic about current market prices, and they are the only ones selling. Those who can't or won't accept current market prices won't sell. It is just like me deciding that I need £10,000 for my car because that is what I paid in 2004. I can put that as the asking price and wait for a buyer, but no sensible person would agree it is still worth that much.

[wombleprincess]

wo more points for discussion

a) supply and demand. there isnt enought supply, therefore demand will continue to rise, which in theory will keep prices fairly bouyant. Given housing stock realised by major house builders is drying up, this may even make the market more buoyant

b) wide generalisations just dont apply. I've just sold my house breaking ceiling price for a similar property by 12.5k, above our own expectation by 2.5k. but thats because its a lovely house in a good location. On the otherhand, houses in our local lovely but new build housing estate are dropping like lead balloons. again thats a supply and demand issue, so situation is totally contingent on what you are selling or buying.

[Upwind]

a) supply and demand. there isnt enought supply, therefore demand will continue to rise...

• post credit crunch demand is expected to find a new lower equilibrium. With mortgages of 8x income or for >90% of purchase price now unheard of, demand at any given price is lower. Demand is also determined by sentiment. A couple of years ago, it was "must get on the ladder before it is too late", now it is "wait a couple of years and we might be able to get a lot more house for our money".

b) wide generalisations just dont apply...

• of course local factors are relevant to an individual transaction, but we are not privy to them, so it is a bit pointless having a general discussion about them. The state of the economy, government policy and incentives, credit availability etc do apply across the board

[noddyholder]

You were very fortunate to complete a sale at that price atm so well done but a lot of people are getting stumped at exchange when many buyers are asking for a discount to reflect the market. 20% off is not unrealistic it is expected.Our seller has requested a 2 week exchange and she has kept the property on the market as she is so scared of this.We decided to negotiate as low as poss as i wouldn't want to get involved in gazundering just feels wrong

[zippitippitoes]

in 1990-91 in this area jhouse prices fell b ut there were hardly any houses for sale so there werent many to buy at the lower prices

i think now that a lot of houses appear to be for sale but people just havent withdrawn them from the market because of those sellers packs

[wombleprincess]

there is enough supply of housing?? have you been asleep for the last five years? its a well known and accepted fact that housing supply will have to grow by approximately 100,000 per year to keep up with demand - thats just population growth!

secondly, rental and purchase sectors for housing are not the same! not everyone who is in a rental property wants to buy, possibly more true in urban rather than rural areas, this is one of the factors that has driven prices and rents ever higher in london

[Upwind]

Womble - I don't think you understand the point Hanaflower made. The yields on property as an investment (rents) should never be so unbelievably low relative to capital values.

"its a well known and accepted fact that housing supply will have to grow by approximately 100,000 per year..."

This fact is well known and accepted by whom? AFAIK that would be a reduction on the current rate of housing supply increase. Even if supply was a constant, falling demand could still lead to reduced prices.

[fishnet]

I agree that there will be big drops but its just impossible to predict how much. Th picture changes daily. The US rescue of fannymae and freddiemac should help the banking sector but its too late in my opinion since the panic has alreday set in in the market and the confidence has gone. who wants to risk buying in a falling market where they could be taking on a larger mortgage than they need to if they wait a few more months.

We completed in July. We incredibly lucky to have buyers who had just sold a business and did not need to sell their house. We're now in rented waiting for things to calm down before buying a forever house. I think 30 per cent is likely to be the maximum. The problem is that buyers will only want to take 30 off their asking price if they think they will get 30 pr cent off the house they're buying and there are still lots and lots of houses on the market at last year's prices with sellers in denial.

[noddyholder]

You are right.30% seems to be the figure.We were looking for a forever house too so when our offer was accepted we went ahead.The agent said our offer was fair aswell and showed me examples of others that had gone under offer and 15% off seemed to be the minimum.Ours was an executors sale so easier to negotiate but it is hard to have the confidence to take a reduction if you are not sure you will get the same when you buy.

[1dilemma]

womble I suspect your figures are very flawed, most of the figures I have seen come from 'vested interests' ie property developers who want planning restrictions relaxed etc etc.
I see no real problem with availability of property, there are no tent cities in the UK, there is a problem with extremely high house prices and with lack of/poor social housing but for many reasons the credit crunch alone will cause a huge drop in that figure

[aSlurOnBrilliantScientists]

gosh a happy thread for the mortgaged amongst us. eek

[wombleprincess]

they are not "my" figures... reviews from the treasury, CBI, IOD .... its quite a simple calculation ... people (population growht and migration) versus housing stock. since we are still sh**ging like bunnies i cant see that demand will change?

Its well known and accepted by most in Government, banking, finance, etc. that is precisely one of the reasons why there has been intervention because they simply in the long term cannot afford house building to grind to a halt.

there are no tent cities because the rental market is buoyant.

[wombleprincess]

actually hanaflower, your last point is incorrect. Ironically, falling value means that the yield on a let property actually increases and rents are static or rising at the moment. of course that doesnt take into account of course what you borrowed on the property.

If you purchases a property for 300k and it gets 6k per annum rent, then logically you would get more in a bank. but if it falls to 100k and rent is the same, you doing ok.

net migration continues to grow, its not just eastern european workers... divorcign couples... isnt that still two properties needed?

[wombleprincess]

well i am not saying they would be jumping for joy just pointing out a fact and how a proffesional investor might look at it in the round.

[KatieDD]

The professional investor sold up in 2004 though, the people who bought after that date for their pensions or jumping on the bandwagon are the ones who are up the creek, because the rents do not cover the mortgage payments in most cases, especially with interest rates rising and fixed deals coming to an end. They get very upset when something goes wrong with the property, because that's coming out of their own pockets in a lot of cases and they were banking on capital gains in the long term, well lets hop they were thinking 10/15 years not 5.

[Upwind]

"If you purchases a property for 300k and it gets 6k per annum rent, then logically you would get more in a bank. but if it falls to 100k and rent is the same, you doing ok."

Nonsense; if you purchased it for 300k you are still getting a measly 2% yield on your original investment. You are getting a paltry 3% yield on the new, reduced, capital value. You can get higher, less risky yields elswhere, so why bother?

[wombleprincess]

actually:

6000/100,000x100=6%
6000/300,000X100=2%

versus bank rates, 6% is obviously better.
versus an annuity investment, also better.

from a pure investment pov, unless you were churning money out of property to invest in other properties, then holding onto a property when you were getting a 2% yield was/is not prudent.

[traceybath]

How long though do people think until sellers really do start putting properties on at sensible prices?

We sold in march and are currently in rented but i'm still seeing some houses on rightmove at the same asking price as they were 18 months ago when i first started looking!

I think we have no choice but to wait another 12-18 months before buying again. We're probably looking at another 5 year house and so really don't want to get buy now and see market drop by up to 30%.

I also do get quite angry about just how greedy some people are with the prices they think they can command. We priced ours realistically and dropped the price twice so we could sell.

[Upwind]

sorry womble - my mistake, I read it as dropped by 100k rather than dropped to 100k

do you really anticipate 66% price falls?