Uk Property: How Low Can It Go

[Jim B.]

You do not have to dig that deep to see an unstoppable (short of a miracle) trend, so why question?

Unless you are adviser to HM Govt?

I can see, and I'm hoping for, big big drops. But really it's unknown territory. We have unusual conditions (much different to the late 80's), a government seemingly desperate to prop up the market no matter what, to get re-elected and a whole host of factors that could effect the situation. No-one can know how this will pan out, however well informed. It's guess work.

[caseyloca]

average house 180k average salary 23k-median.currently 7.82 times long term average 3.5 = 80.5k.......................

and thats if the average salary doesn't go down into the recession.

Do you think it would ever return to those sorts of numbers. It would be great if it did, but wouldn't those people on lets say 60-70k buy up those 80k properties as an investment.

It would make sense seeing as though the market would have been deemed to be at the bottom.

I only say this as my partner and I are fortunate enough to earn over a 100k, as such we would seriously consider buying one or two properties if we could get them for 80k each

Just some thoughts, I just wonder how long before your investor comes back into the market, as at some point in the future the mortgage and rental income will tie up. (Assumes no major interest change)

* Awaitings bashing *

[Killer Bunny]

I only say this as my partner and I are fortunate enough to earn over a 100k, as such we would seriously consider buying one or two properties if we could get them for 80k each

WHY WHY WHY???????????

Commodities will grow far faster than houses over the next 10-20 years !!!!!!!

[renterbob]

Although I've already posted on the excellence of the show, I've got a question kinda like the title of this thread.

The majority of forecasts seem to now be around the -30 to -40% range. As a FTBer, myself and most of my friends who routinely debate this at work and the pub are all in the position where we cannot see being able to afford a normal repayment mortgage even with prices falling by those kind of amounts. The consensus for us is that we need at least 50 to 60% falls to have a hope.

To have hope of what? A better life?

Rent a place within your means and have a better life, having a roof over your head owned by the banks, with declining value, with all the credit catastrophes about to happen will not make for a better life, on the contrary.

As for house prices, we have seen 89K homes in USA being solf for 9K, already there are 40% reductions from only last December in the UK, so I believe that many prices wil fall by over 80% within a year.

Those hanging on and maxing out their credit cards to pay the mortgage and food bills are storing up far worse problems for the future. The Californian middle class now living in their cars will be here in the UK soon, and the media will try and keep it quiet.

Some of the media may well be joining them with their soon-to-be diminishing BTL portfolios.

If the UK does not grow enough food for it's population (95% of fruit and Veg sold in UK supermarkets are imports) or manufacture we cannot work ourselves out of this one, unlike the last few.

Be more concerned with buying bread, potatoes and milk than getting yourself into a house trap.

[1929crash]

An excellent podcast.

I know some people who have inherited a property which has been on the market for nine months with not one expression of interest. However, the EA advises them not to drop the price, and when I suggest they do just that, they reply that "The Estate Agent knows his job, surely"

The podcast answered this point perfectly. Very few EAs were around at the time of the last crash in 1989. They have no memory and no experience of it.

[winkie]

An excellent podcast.

I know some people who have inherited a property which has been on the market for nine months with not one expression of interest. However, the EA advises them not to drop the price, and when I suggest they do just that, they reply that "The Estate Agent knows his job, surely"

The podcast answered this point perfectly. Very few EAs were around at the time of the last crash in 1989. They have no memory and no experience of it.

Estate agents IMO are a dying breed, what can they do for you that you can't do for yourself for less? To be truthful I feel I know my local market far better than any cocky nosed know it all, lived it and done it all boy racer does. I am sure there are some very knowledgable, honest exceptions I have yet to meet, but until I do I feel you are better, wiser and richer to go it alone.

[Elizabeth]

An excellent podcast.

I know some people who have inherited a property which has been on the market for nine months with not one expression of interest. However, the EA advises them not to drop the price, and when I suggest they do just that, they reply that "The Estate Agent knows his job, surely"

The podcast answered this point perfectly. Very few EAs were around at the time of the last crash in 1989. They have no memory and no experience of it.

Clearly the people you know with the inherited property are thick as planks and from a Darwinian perspective deserve to loose the lot. Trusting someone just because of a title is always an act of obsequious stupidity in the face of pomposity.

[1929crash]

Clearly the people you know with the inherited property are thick as planks and from a Darwinian perspective deserve to loose the lot. Trusting someone just because of a title is always an act of obsequious stupidity in the face of pomposity.

A bit harsh, I think. If estate agents - the so-called experts - are in a daze, then what chance for ordinary folk brought up on years of "House prices only ever go up."

My fear is that these people, by reducing accordingly, might sell at less of a loss now than later.

[CharlieChuck]

Listened to this this morning, a true bear fest. It was good to hear an honest estate agent who has a brain. The only EA's that will stay in business over the next few years will be ones with attitudes like his.

[dom72]

I had this same argument from a mates mrs who i tried to stop buying a BTL last year.her hubbie is a very old friend,normally i wouldn't bother.ie 'I've loads of mates who are ready to step in and buy etc.currently nursing a near 20% loss.

markets aren't rational and it always mamzes me how many people make staements like yours and then when the market-guns/butter etc-is tanking they just shit themselves and stay on the sideline with everyone else.

trust me.when there's doom everywhere,you won't be so brave/stupid as you're suggesting.best of luck if you do

have to agree with the reaper; as an architect i have lost 3 client contacts who have been made redundant. two sites frozen and only above ground building works to be completed. one site has sold off 40 flats to Housing Association. the scheme already had 40% affordable so now will have 77% affordable. fancy buy to let on what could become a great affordable and buy-to-let, unlet estate? (who you rent privately for 550 a month when the neighbours are paying 245 a month????)

so if you dont think thinks are going to get much worse, think again.!

[Second Time Around]

have to agree with the reaper; as an architect i have lost 3 client contacts who have been made redundant. two sites frozen and only above ground building works to be completed. one site has sold off 40 flats to Housing Association. the scheme already had 40% affordable so now will have 77% affordable. fancy buy to let on what could become a great affordable and buy-to-let, unlet estate? (who you rent privately for 550 a month when the neighbours are paying 245 a month????)

so if you dont think thinks are going to get much worse, think again.!

I just noticed this pinned thread and thought I would just chip in with my penny's worth.

Less than three months ago I started a similar topic:

http://www.housepricecrash.co.uk/forum/ind...c=76188&hl=

I made a suggestion in the thread that once we reach 3.5x average income again there might be further falls ie to 2.5x-3x income before the market would be in a position to be revived.

As I see events unfold I am more convinced this is more rather than less likely. I don't buy the joint income argument because this only appeared a "normal" situation where couples felt confident that there would be a quick financial return and inflation would erode the debt to enable sufficient capacity to cover future financial provision such as the cost of childcare and saving for retirement. We are exiting an era of continuous growth, low interest rates and high job security and entering a phase of increasing interest rates, recession/depression and insecurity. Couples, like individuals, have no reason to recklessly buy into a falling market.

However, to experience an undershoot of prices at 3x average income (say £25k) would mean:

(£25k x3) + 10% deposit ie (£8,333) = £83,333.

To achieve this would require falls between 60% to 70% from the top (about £200k depending on area) in real terms

I am going with Realistbear (who has already made this prediction) although it may take 4-5 years to achieve.

We should re-name the thread "Reasons to be cheerful, Part One".

[uptherebels]

OK, it's my own fault I know,(too much tv news) but I have a vision, and it's not good. I would love to see falls of 40, 50 % or more. BUT, what I see at the moment is this.

1. Oil coming down, therefore everything coming down.

2. No pressure on inflation

3. Interest rates to come down.

4. House prices have already dropped more than official figures say.

5. Out of the whole population, hardly anyone reads this site.

6. Media and VI spin will go into overdrive.

7. The banks have already announced all the bad news.

8. The government will not allow a bank to go under.

9. The general public believe this HPC is over.

10. Banks will start lending again. If they don't lend, they don't make money.

All this means that prices will rise faster than ever, as everyone piles back on board the great property gold rush. That seems to include half the posters on this site who are waiting to pounce.

As I said, I want to see, and think we need, at least 50% falls. So the above is a nightmare. What I need is someone to tell me why the above will not happen. I am looking for a big bear to reassure me !!!!!!!

[Ferret]

Uk Property: How Low Can It Go,

When the Sellers decide they are no longer playing the game and decide to stay where they are.

[US Citizen]

OK, it's my own fault I know,(too much tv news) but I have a vision, and it's not good. I would love to see falls of 40, 50 % or more. BUT, what I see at the moment is this.

1. Oil coming down, therefore everything coming down.

2. No pressure on inflation

3. Interest rates to come down.

4. House prices have already dropped more than official figures say.

5. Out of the whole population, hardly anyone reads this site.

6. Media and VI spin will go into overdrive.

7. The banks have already announced all the bad news.

8. The government will not allow a bank to go under.

9. The general public believe this HPC is over.

10. Banks will start lending again. If they don't lend, they don't make money.

All this means that prices will rise faster than ever, as everyone piles back on board the great property gold rush. That seems to include half the posters on this site who are waiting to pounce.

As I said, I want to see, and think we need, at least 50% falls. So the above is a nightmare. What I need is someone to tell me why the above will not happen. I am looking for a big bear to reassure me !!!!!!!

The housing market has gone to hell in a basket. One year on from credit crunch and sentiment in the housing market has changed from wildly optimistic to not a chickens chance in Thailand. It doesnt really matter about all of the above. Only a fool would buy now and the sheeple know it, it will take a lot to change their minds back.

[uptherebels]

The housing market has gone to hell in a basket. One year on from credit crunch and sentiment in the housing market has changed from wildly optimistic to not a chickens chance in Thailand. It doesnt really matter about all of the above. Only a fool would buy now and the sheeple know it, it will take a lot to change their minds back.

I actually hope you are right. I think the sheeple only know one thing, and that is the market as it's always been (in their lifetime). By the time we reach the bottom price wise, I still think that by then, with the backlog of demand and the STR's and so on, the only way will be up. That's if we are still here by then of course Thanks for commenting

[Bubble Pricker]

2. No pressure on inflation

inflation is ultimately generated by inflating the money supply. This is continuing at full speed, as governments are bailing out banks left right and centre. Inflation will accelerate, if anything.

3. Interest rates to come down.

I doubt that will happen, but in any event, the interest rates set by the BoE are becoming detached from actual mortgage interest rates

10. Banks will start lending again. If they don't lend, they don't make money.

I think that's where you are completely wrong. Banks will not start lending again in the same way as before for a very long time.

[bobby9983]

UK property will decrease in value until approx 2010-2011. At that point, assuming its still there and not disappeared in a cloud of revolutionary economic collapse and Armageddon, the US market will start to end the writedowns and losses at banks from bad lending practices and their property market will pick up again.

All it will take is the US to weed all the bad mortgages out of its loan book and investors can start buying securities with the knowledge that they are backed by loans that won't go bad. Technology will help with this as banks will implement much more robust loan portfolio management.

Our banks will also gain confidence and start lending again in earnest, although I do think we are beginning to see signs that UK credit tightening, at least as far as mortgages are concerned, is reaching a peak and lending has relaxed somewhat in the past few weeks.

Some of the higher LTV deal rates are being reduced and I don't think it'll be long before 100% mortgages for first time buyers come back to the market.

The only problem is that all this can only be achieved by the US extending and prolonging their national debt, which is a noose that tightens round the neck of the entire world daily.

Hey ho!

[rramah]

Am I dreaming ?

Was that coffee I`ve just had a little too strong ?

I never thought I`d type this -

AN HONEST ESTATE AGENT THAT TALKS SENSE !

FP will have nothing to say !

PS. He`s now starting to talk about buying cheap property and making money out of it. I deduct 2 marks, but at least he started off well.

Edited July 24, 2008 by rramah

[tommy75]

http://www.findaproperty.com/displaystory....p;storyid=22181 . Does this mean a slight hold or a pickup with more ftb's comming in?

[Ferret]

No! it is far too early.

Dont fall for VI spin !!

Agreed, listen to the real brains on this Forum.

[Disillusioned]

I took great pleasure playing this interview out loudly while I did some late night work - some 0f my colleagues' faces were a picture!

http://www.findaproperty.com/displaystory....p;storyid=22181 . Does this mean a slight hold or a pickup with more ftb's comming in?

Could do, or it could mean that there are fewer other types of buyer this month...

[CharlieChuck]

Some of the higher LTV deal rates are being reduced and I don't think it'll be long before 100% mortgages for first time buyers come back to the market.

I can't see the return of 100% mortgages while prices are dropping, it just makes no financial sense. IMO the banks will only return to these when they are convinced the falls have dropped. In the first 2 years of a 25 year repayment mortgage only about 4% of the capital is repaid, the rest is all interest. 3 months of arrears plus costs would quite easily wipe out this equity if prices remain flat.

The banks are picking and chosing who they lend to at the moment, I can't see them touching >95% mortgages without other security.

[CharlieChuck]

CC, you need to check up the 18 year cycle of Fred Harrison. // see:

He is very clear on where we are in the cycle. The UK is in the correction phase where prices fall sharply, and banks return to traditional lending standards.

There will be no return to 90-100% lending, except maybe after 15-18 years.

Instead, there's more likely to be a return to 65-70% lending (which is prudent lending.)

Those who do not accept this are likely to be hammered by the market.

Thanks, I'll try and have a look at some point.

To be completely honest I'm surprised banks are still lending at anything over 80% at the moment, considering a lot of economists are now starting to predict over 20% falls in the coming years. I guess the banks are suffering a bit from panic lending, they need their high front loaded arrangement fees for their P&L's, but they're storing up a bigger future problem at the exact time they should be protecting themselves.

[zamo]

Thankyou Drbubb, i love all your podcasts and am a big fan of your posts!

Cheers for all the selfless valuable info you provide

Just ordered harrisons book also, should be here any day soon!

[bobby9983]

CC, you need to check up the 18 year cycle of Fred Harrison. // see:

He is very clear on where we are in the cycle. The UK is in the correction phase where prices fall sharply, and banks return to traditional lending standards.

There will be no return to 90-100% lending, except maybe after 15-18 years.

Instead, there's more likely to be a return to 65-70% lending (which is prudent lending.)

Those who do not accept this are likely to be hammered by the market.

DrBubb, as you know lots about Harrisons cycle when in the future do you think the banks will stop lending at 90-100%?

A quick check on Moneyfacts and I can see at least 22 lenders in the UK who are still lending at 95% LTV, even to first time buyers.

Also, I would add that prudent lending as far as a lender concerns is far more centered on the borrowers ability to pay rather than the loan to value. Loan to value has little to do with prudence if you vet your mortgagors correctly. After all, if they continue to pay in negative equity then they can't sell and its not as if UK law allows them to walk away either!

Edited July 25, 2008 by bobby9983