Corona property prices

[Montello]

Money Week article: https://moneyweek.com/investments/pr...market-outlook


If the base rate peaks at 5% then “we expect nominal house prices to fall by 12% between now and mid-2024”.

Similarly, Simon French of Panmure Gordon predicts that average house prices will fall 14% over the next three years or 29% in real terms.

[Mick P]

Money Week article: https://moneyweek.com/investments/pr...market-outlook


If the base rate peaks at 5% then “we expect nominal house prices to fall by 12% between now and mid-2024”.

Similarly, Simon French of Panmure Gordon predicts that average house prices will fall 14% over the next three years or 29% in real terms.

There are loads of people sitting on piles of cash that is being eroded by inflation so they will be tempted to buy BTL on a cash basis and at least rake in the rent.

Also we have too many people in our little island and not enough properties and they need to either buy or rent and that will put pay to any big crash. A stagnation possibly but not a crash.

Also building societies will protect their assets by refusing to transfer an existing mortgage to another house, so I cannot see it happening.

[Estoril-5]

average house prices will fall 14% over the next three years or 29% in real terms. [/I]

what does 'real terms' mean?

[Montello]

what does 'real terms' mean?

I assume they are compounding forecast reduction in actual prices with their forecast for inflation ... nice for making an alarmingly high figure.

I think it best to treat prices and inflation separately otherwise you can't see which effect is greatest.

Inflation effects everything not just property.

[Davidd]

There are loads of people sitting on piles of cash that is being eroded by inflation so they will be tempted to buy BTL on a cash basis and at least rake in the rent.

Also we have too many people in our little island and not enough properties and they need to either buy or rent and that will put pay to any big crash. A stagnation possibly but not a crash.

Also building societies will protect their assets by refusing to transfer an existing mortgage to another house, so I cannot see it happening.

Estimates vary but there are 600-650,000 vacant properties in the UK. House builders are also sitting on huge land-banks. Just saying.

[Rodder]

Estimates vary but there are 600-650,000 vacant properties in the UK. House builders are also sitting on huge land-banks. Just saying.

Land banks are different to empty property. Of the estimate you quote I wonder how many are liveable. I mean you can buy houses for a couple of quid in some parts of the country

[Davidd]

Land banks are different to empty property. Of the estimate you quote I wonder how many are liveable. I mean you can buy houses for a couple of quid in some parts of the country

If a fraction of them were it’d make a huge difference to the 100,000’s living in temporary or unsuitable housing. Those houses for a couple of quid are probably in the hundreds and have been taken under council control and are often sold to those willing to make the required modernisations, often local people and on the proviso they’re not sold for a number of years. Unsure if any other restictions are put on them,probably depends on the council, but this has been the case on the ones i’ve seen sold in Liverpool for example.

I’m quite aware that land banks are different. The point i was trying to make is that the land is available to build houses on, the political will and seemingly businesses themselves are reluctant to utilise it.

[2ptjoe]

Hmmmm.
all my properties are sat safely with fixed rates which was more by luck than judgement. Well, all bar one.
It’s another btl which makes sensible money but that mortgage has now doubled from £210 pm to £430 with an income of £900.
I’m in two minds what to do now. I’ve been offered a deal but 5 year at 4.73. My mortgage guy is saying that at least I’ll know I have a sensible return for the next 5 years.
I’m not so sure if it’s too long though.

I’m not gloating but one chap I know is really struggling. He always said borrow as much as you can , it’s not your money so get as much as you can and allow the property to earn you money.
Well he is in a right muddle now , selling two properties as he needs cash to prop things up.

[beechcustom]

My old house went on the market for rental on Wednesday. 9 viewings on Friday and 4 offers with tenant selected (teacher and nurse couple who have family in the area). They paid the holding fee and subject to references they'll be in within a few weeks. The letting agent set the rent at much higher than I ever imagined would be achievable but it looks like tenants are out there and willing to pay!

[murkeywaters]

Photographed a house the other day, landlord selling as he wants it all gone before his fixed rate 5 year comes to an end in the next 12 months, could be one of many!

[noTAGlove]

Photographed a house the other day, landlord selling as he wants it all gone before his fixed rate 5 year comes to an end in the next 12 months, could be one of many!

5 year fixed rate mortgages were 2.01% when he/she took theirs out in October 2018.

https://www.statista.com/statistics/...interest-rates

Look like they are going to be paying at least 3.5 times the mortgage payments upon renewal for an interest only type mortgage which most landlords have.

On a £200k mortgage that is an increase from £334 pcm to £1167 pcm, or an increase of £833 pcm.

No idea why they are selling as they will just increase the rent by the same amount, lol

[blackal]

5 year fixed rate mortgages were 2.01% when he/she took theirs out in October 2018.

https://www.statista.com/statistics/...interest-rates

Look like they are going to be paying at least 3.5 times the mortgage payments upon renewal for an interest only type mortgage which most landlords have.

On a £200k mortgage that is an increase from £334 pcm to £1167 pcm, or an increase of £833 pcm.

No idea why they are selling as they will just increase the rent by the same amount, lol

They will be paying income tax on 3.5 times the rental too, though?

[Montello]

They will be paying income tax on 3.5 times the rental too, though?

Section 24 deletion changed the landscape big time for leveraged landlords.

[Montello]

Lloyds forecast: https://www.bbc.co.uk/news/business-63411783

UK house prices will fall by 8% next year and then almost stagnate for the following four years, Lloyds Banking Group has predicted.

The UK's biggest mortgage lender, which runs the Halifax brand, gave a gloomy outlook for the UK economy.

[noTAGlove]

Lloyds forecast: https://www.bbc.co.uk/news/business-63411783

UK house prices will fall by 8% next year and then almost stagnate for the following four years, Lloyds Banking Group has predicted.

The UK's biggest mortgage lender, which runs the Halifax brand, gave a gloomy outlook for the UK economy.

Do not rely on the commentary from those with a vested interest.

The financial industry predictions 12 months ago was that interest rates in the current cycle would peak at less than 2%. Hmmmm.

Even if we do get an 8% fall and stagnation for 4 years, if inflation stays around 5%, that is a real terms fall in house prices of over 30%.

[Montello]

Do not rely on the commentary from those with a vested interest.

I'm not relying on anything; I am just sharing an item pertinent to this topic; each can reach their own deductions ... clearly its in their interests to talk things up ...

The financial industry predictions 12 months ago was that interest rates in the current cycle would peak at less than 2%. Hmmmm.

Are you suggesting they should have known that Russia would invade Ukraine and amended their forecasts accordingly?

[noTAGlove]

Are you suggesting they should have known that Russia would invade Ukraine and amended their forecasts accordingly?

I think Ukraine, whilst having an impact, is a side show when it comes to inflation.

More to do with vast amounts of fiat created by electronic printing presses, exit of generally older people from the workforce and for the U.K., kicking Johnny European foreigner back home.

Putin had got a lot to answer for, but in respect of inflation he is an easy target to mask the crooks of the Central Banks.

Ok your vegetable oil may have gone up in price, but nothing in comparison with the vast wealth for the already asset rich that the central banks have created.

[Montello]

I think Ukraine, whilst having an impact, is a side show when it comes to inflation.

More to do with vast amounts of fiat created by electronic printing presses, exit of generally older people from the workforce and for the U.K., kicking Johnny European foreigner back home.

Putin had got a lot to answer for, but in respect of inflation he is an easy target to mask the crooks of the Central Banks.

Ok your vegetable oil may have gone up in price, but nothing in comparison with the vast wealth for the already asset rich that the central banks have created.

Well that is one way of looking at it ... clearly more than one cause but I wouldn't describe it as a "side show" ...

Anyway ... time will be the judge ... we can only hope for a swift end to the war ...

[noTAGlove]

we can only hope for a swift end to the war ...

That we can definitely agree on.

I think the Government will do everything to limit the damage in the housing market.

If they can get away with nominal falls, while talking tough on inflation but never doing anything about it, then inflation will insidiously create significant real terms fall in the housing market without anyone noticing, as everyone thinks there house is still as valuable.

Whereas in real terms it will be -30%+ fall

That has to be the strategy to keep the Tories in power, as a sinking housing market will crucify them.

[mrsammyp]

Nobody can predict the housing markets and as we know the government love to intervene (e.g. MIRAS in the 80’s).

When rates get too high, I wouldn’t be surprised if banks started offering more interest only products, like they did in the early 2000’s which fuelled house prices.


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[walkerwek1958]

Based purely on history a significant drop in house prices seems unlikely but I wouldn’t rule it out, the current situation with sharply increased interest rates combined with inflation and cost of living rises has create a perfect storm. Personally I wouldn’t care if they dropped 50%, a return to sensible affordability would be a good thing overall.

- - - Updated - - -

Based purely on history a significant drop in house prices seems unlikely but I wouldn’t rule it out, the current situation with sharply increased interest rates combined with inflation and cost of living rises has create a perfect storm. Personally I wouldn’t care if they dropped 50%, a return to sensible affordability would be a good thing overall.

[noTAGlove]

I am surprised it is just 80%

https://www.thetimes.co.uk/article/9...9e3df52c9d2dcf

Is this the end for the small-time landlord?

https://www.thetimes.co.uk/article/5...4c24f2694bbad0

[boring_sandwich]

I am surprised it is just 80%

https://www.thetimes.co.uk/article/9...9e3df52c9d2dcf

Is this the end for the small-time landlord?

https://www.thetimes.co.uk/article/5...4c24f2694bbad0

It may help with house prices continuing to come down and settle at sensible levels allowing the younger generation to get on the property ladder.

[Passenger]

I am surprised it is just 80%

https://www.thetimes.co.uk/article/9...9e3df52c9d2dcf

Is this the end for the small-time landlord?

https://www.thetimes.co.uk/article/5...4c24f2694bbad0

Is it the end, my friend..I dunno, we´re hanging in there...but only got a couple and as the article makes the point in conclusion you can be more agile with a few than a bloc of hundreds. Also we always took a conservative approach to leverage, bought at what we considered below market rate, added ´sweat equity´, been at it for decades now, so hopefully have ducks in a row. Exciting times though eh.

[noTAGlove]

Lloyds forecast: https://www.bbc.co.uk/news/business-63411783

UK house prices will fall by 8% next year and then almost stagnate for the following four years, Lloyds Banking Group has predicted.

The UK's biggest mortgage lender, which runs the Halifax brand, gave a gloomy outlook for the UK economy.

Nationwides worst case view.

House prices will fall by up to 30% in next year, lenders warn

https://www.thetimes.co.uk/article/4...190d0d10655574

[Mick P]

Nationwides worst case view.

House prices will fall by up to 30% in next year, lenders warn

https://www.thetimes.co.uk/article/4...190d0d10655574

Most sellers tend not to sell at low prices and just wait for the market to pick up. No one is going to take a financial hit unless they are absolutely forced to. This alone stops the market from dropping too much.

It's the same old argument, too many people, not enough properties and not enough being built keeps the market going up in the long term.

[Kingstepper]

Most sellers tend not to sell at low prices and just wait for the market to pick up. No one is going to take a financial hit unless they are absolutely forced to. This alone stops the market from dropping too much.

If prices drop across the board, it's an opportunity to move up the ladder.

[walkerwek1958]

If prices drop across the board, it's an opportunity to move up the ladder.

Very true, the gap between what you own and what you aspire to own might shrink sufficiently to make a leap up the ladder achievable. Won’t affect me, my next move is into a wooden box, having bought a run down property and put £100k into it I ain’t moving! My driveway is being dug up and relaid as I type, thats the final piece of a jigsaw that’s taken 2 years to complete.

Every cloud has a silver lining, a significant drop in property prices would be a good thing for many. I have little sympathy for the buy to let brigade who borrowed too much to buy properties, the flaw in that model was always clear to see.

I expect a downturn in activity for the building trade, it'll be easier to get work done, but I fear the big increases in materials costs are here to stay and that doesn’t help anyone.

[noTAGlove]

Most sellers tend not to sell at low prices and just wait for the market to pick up. No one is going to take a financial hit unless they are absolutely forced to. This alone stops the market from dropping too much.

It's the same old argument, too many people, not enough properties and not enough being built keeps the market going up in the long term.

I always feel that in your underlying tone you think high and increasing houses prices are a good thing.

They are only a good for a small minority of people; those looking to downsize (generally the elderly) investors and second home owners.

For everyone else, the vast majority, high house prices are a bad idea thing.

[Montello]

Nationwides worst case view.

House prices will fall by up to 30% in next year, lenders warn

https://www.thetimes.co.uk/article/4...190d0d10655574

LOL ... you do love to spread as much doom as possible ... worst case presented ...central scenario not mentioned ...

Chris Rhodes, chief finance officer at Nationwide Building Society, said their “worst case” scenario was that house prices would fall by 30 per cent from earlier this year. Their central scenario was a fall of 8 to 10 per cent.

How about a wager for the Fundraiser?

Currently an average house as listed on the ONS website is: £292,000 in July 2022 (https://www.ons.gov.uk/economy/infla...index/july2022)

If the average price on the ONS website drops below £204,400 in the next 12 months I will pay £50 to the fundraiser; if that does not happen you pay ... do we have a bet?

[guinea]

I own two homes, one outright, one with a about 25% of the value left on the mortgage.

I'd love to see a 50% drop in housing costs.

Pretty please.

[blackal]

Most sellers tend not to sell at low prices and just wait for the market to pick up. No one is going to take a financial hit unless they are absolutely forced to. This alone stops the market from dropping too much.

.

I always feel that in your underlying tone you think high and increasing houses prices are a good thing.

They are only a good for a small minority of people; those looking to downsize (generally the elderly) investors and second home owners.

For everyone else, the vast majority, high house prices are a bad idea thing.

Many people tend to have this mental refusal to drop the asking price to a new market 'value' - if it was significantly higher (say) last year.

Even if they eventually have to drop the asking price as the desire/requirement to move takes precidence - they will resent the hell out of having to do it.

[wileeeeeey]

We're in a "forever house" currently, should be here until at least 60-65. No need to move unless our finances change drastically for the better or worse.

If there was a serious drop of prices around 20-30% I'd push and move up the ladder if it was possible, even if that meant selling at a loss here. It's all relative and the cost to change is the only thing which matters.

[noTAGlove]

LOL ... you do love to spread as much doom as possible ... worst case presented ...central scenario not mentioned ...

Chris Rhodes, chief finance officer at Nationwide Building Society, said their “worst case” scenario was that house prices would fall by 30 per cent from earlier this year. Their central scenario was a fall of 8 to 10 per cent.

How about a wager for the Fundraiser?

Currently an average house as listed on the ONS website is: £292,000 in July 2022 (https://www.ons.gov.uk/economy/infla...index/july2022)

If the average price on the ONS website drops below £204,400 in the next 12 months I will pay £50 to the fundraiser; if that does not happen you pay ... do we have a bet?

I did say it was the worst case scenario. It is not my worst case scenario. Just repeating what Nationwide think is their worst case.

Property is illiquid and may take many years to fall.

Given illiquidity there is little chance property prices will be down 30% in 1 year. It took 6 years for the 1990s crash bottom.

Initially the fall was slow in the very early 90s and then picked up significant speed around 92 and 93, while continuing to slide from 93 to 95, even when inflation was running at a clip.

Also depends whether you talk actual values or real terms. Inflation has the ability to mask significant real terms falls in house prices.

[Montello]

I did say it was the worst case scenario. It is not my worst case scenario. Just repeating what Nationwide think is their worst case.

Property is illiquid and may take many years to fall.

Given illiquidity there is little chance property prices will be down 30% in 1 year. It took 6 years for the 1990s crash bottom.

Initially the fall was slow in the very early 90s and then picked up significant speed around 92 and 93, while continuing to slide from 93 to 95, even when inflation was running at a clip.

Also depends whether you talk actual values or real terms. Inflation has the ability to mask significant real terms falls in house prices.

So do we have a bet or not?

[noTAGlove]

So do we have a bet or not?

On the terms you have laid out, I am not a fool.

[Montello]

On the terms you have laid out, I am not a fool.

But you have repeatedly forecast a huge drops in the next year ... even 50% below ...

Think I will wait a few months and pick up a bit of nice coastal property for half price.

So, if you don't think they will drop 30% what is your forecast ... maybe we can still frame a wager ...

[JasonM]

It may help with house prices continuing to come down and settle at sensible levels allowing the younger generation to get on the property ladder.

I don’t know if it will make too much difference? Lower house price but higher interest rates might still make them unaffordable to the younger generation. I will make the deposit less I guess.

[Mick P]

If prices drop across the board, it's an opportunity to move up the ladder.

Yes there is always a winner for every loser.

[thegreatdogwood]

Yes there is always a winner for every loser.

If you are already "in the game" the wins and losses are heavily diluted though.

So if you currently own a property worth £400k and aspire to own one that's £600k there is a £200k gap. Market falls 20% and the equation becomes £320k up to £480k = £160k gap, but the implied cost of servicing any increased debt goes up too meaning it might not be any more affordable unless you can fund through equity.

Market changes have the greatest impact on those entering or exiting the market, good in theory for first time buyers if stock is available, bad for those exiting. It will be the "need" to sell that determines the market movement, probate will always service part of the market but defaults / forced sellers are what will determine the shape of the next few years, which in turn is a political hot potato.

[Mick P]

If you are already "in the game" the wins and losses are heavily diluted though.

So if you currently own a property worth £400k and aspire to own one that's £600k there is a £200k gap. Market falls 20% and the equation becomes £320k up to £480k = £160k gap, but the implied cost of servicing any increased debt goes up too meaning it might not be any more affordable unless you can fund through equity.

Market changes have the greatest impact on those entering or exiting the market, good in theory for first time buyers if stock is available, bad for those exiting. It will be the "need" to sell that determines the market movement, probate will always service part of the market but defaults / forced sellers are what will determine the shape of the next few years, which in turn is a political hot potato.

Yes yes yes but just remember that the £160k reduces by the rate of inflation every year. So on a level of 10% inflation, the debt of £160k is the same as £144k next year. This was how baby boomers shafted the system during the 70s/80s and 90s.

[Montello]

Death, Divorce and Debt are the 3 forced exits from the market.

I’m sure there will be some debt related forced sales.

[thegreatdogwood]

Yes yes yes but just remember that the £160k reduces by the rate of inflation every year. So on a level of 10% inflation, the debt of £160k is the same as £144k next year. This was how baby boomers shafted the system during the 70s/80s and 90s.

That's an affordability point, the theory being house prices are going up, salaries are going up and so the £160k becomes more affordable and would have been larger the following year as the price gap increases. In these strange times inflation is driven by very separate matters like energy, not a representation of wages or house prices. Despite 10% headline inflation, house prices are falling and real net disposable income is falling. By that equation, a years' time looks worse, the "opportunity" is for those with equity, anyone going down the debt route will need to wait for the market to bottom out and real net disposable income to at least stabilise before the process you mention may come into play.

[ryanb741]

I suspect we'll see 40 year mortgages come onto the market to lower the monthly cost for 1st time buyers

[noTAGlove]

I suspect we'll see 40 year mortgages come onto the market to lower the monthly cost for 1st time buyers

Or interest only where you rent from the bank your whole life.

You will own nothing and be happy.

[Wolfie]

Death, Divorce and Debt are the 3 forced exits from the market.

I’m sure there will be some debt related forced sales.

This is the sad fact…. People will have extended mortgages to a place they felt they could afford at the time….

Any contract warns that rates can go up or down…. If you’re renewing within the next few years you could see your mortgage payment balloon…. It must be awful for people in an over extended position as many will have no option but to exit…

[CardShark]

I suspect we'll see 40 year mortgages come onto the market to lower the monthly cost for 1st time buyers

A work colleague got the keys to his house with a 40y mortgage last year, a friend's son and his GF did the same last week.

[Montello]

A big part of the affordability issues are lifestyles.

They had a woman on the news last night who was worrying about what happens at the end of her fixed rate next summer. Currently she's paying £1800 pcm and is worried it will go up to £2600.

She should have thought about interest rates when she took on a huge mortgage ... also she had 3 kids and 2 designer dogs ... plus I bet 2 new cars on the drive. All these things are lifestyle choices and I'd say she's massively over committed herself and she's now in a problem of her own making yet the thrust of the item was that she was in some way a victim of circumstances and/or government policy.

People are/have been living lifestyles they could only afford because of low interest rates and they have perhaps felt more wealthy than they really were because of inflating asset prices ... party is over ...

[Passenger]

One's primary residence is generally excluded from CGT...not sure how that's relevant, leastways not to owner occupiers.

Aye when the tide goes out you discover who has been swimming in the nuddy.

[hogthrob]

Hearing this morning the Chancellor is thinking about raising CGT!

https://12ft.io/proxy?q=https%3A%2F%...ns-tax-raid%2F


Not goods news for BTL landlords looking to get out of the BTL market.


Not just CGT though

"Mr Hunt is looking at raising the dividend tax rate and a cut to the tax-free dividend allowance in a £1bn-a-year tax raid on pensioners, business owners and the self-employed."