House Prices Down 50% On Best Estimate

[woody]

There has been a lot of discussion about the exchange rates - super bad for us all getting paid in GBP. However, if all your assets are in UK property, you have lost 50% of the value of your asset base in 1 year.

Why? 20% of fall in the house price and 30% because of the value of the GBP against the USD. If the house prices drop further to approximately 35-40% nominal fall from peak, will we have seen a 60-70% drop in the "value"? Looks like it to me.

As you can see from my member number, I have been around for a while. A few years ago, suggesting a 30% drop in value drew ridicule (I had thought about 40% would be right as a drop). I am horrified by the speed, acceleration and depth of this problem. The house price crash has so many faces to it.

[housespider]

There has been a lot of discussion about the exchange rates - super bad for us all getting paid in GBP. However, if all your assets are in UK property, you have lost 50% of the value of your asset base in 1 year.

Why? 20% of fall in the house price and 30% because of the value of the GBP against the USD. If the house prices drop further to approximately 35-40% nominal fall from peak, will we have seen a 60-70% drop in the "value"? Looks like it to me.

As you can see from my member number, I have been around for a while. A few years ago, suggesting a 30% drop in value drew ridicule (I had thought about 40% would be right as a drop). I am horrified by the speed, acceleration and depth of this problem. The house price crash has so many faces to it.

These must be averages as believe you me property prices have certainly not deopped buy those amounts around my way (Oxfordshire) and in fact nothing, and I mean nothing in my postcode has been reduced since Sept/Oct of last year and even those drops did not amount to anywhere near 20%. It's making me more and more annoyed.

[arby1]

These must be averages as believe you me property prices have certainly not deopped buy those amounts around my way (Oxfordshire) and in fact nothing, and I mean nothing in my postcode has been reduced since Sept/Oct of last year and even those drops did not amount to anywhere near 20%. It's making me more and more annoyed.

there's a big difference between asking price and selling price. why don't you start making offers and see if anything gets accepted!

[leob84]

Oh my god!

That's huge drop.

[HAMISH_MCTAVISH]

There has been a lot of discussion about the exchange rates - super bad for us all getting paid in GBP. However, if all your assets are in UK property, you have lost 50% of the value of your asset base in 1 year.

Why? 20% of fall in the house price and 30% because of the value of the GBP against the USD. If the house prices drop further to approximately 35-40% nominal fall from peak, will we have seen a 60-70% drop in the "value"? Looks like it to me.

As you can see from my member number, I have been around for a while. A few years ago, suggesting a 30% drop in value drew ridicule (I had thought about 40% would be right as a drop). I am horrified by the speed, acceleration and depth of this problem. The house price crash has so many faces to it.

I think the key thing to remember is that most people in the UK don't really view currency devaluation as being of any importance. Other than a holiday in europe/usa once or twice a year, it's of no thought to them.

Unless you live/work abroad, get paid in other currencies, or have significant savings/investments in other currencies, which is less than one percent of the population, i'm sure.

This won't much change until the cost of imported goods raises inflation. Then I suspect it will become more obvious to more people.

Expats, and former expats, tend to have a more global view, balancing asset prices against exchange rates. For example, I frequently look at Aussie house prices, as I'll eventually retire there. To me they look cheap (even today), but thats only because of the exchange rates and salary differential. To Aussies, they're bloody expensive at 8-9 times salary average.

[w_n_s]

I bought my house in July 2006. This was about a year before the peak and crazy prices in Belfast NI. Cost me £149,550 for a 3 bedroom end terrace. It went on at £129,000 and sold after about 4 - 5 months for the price I paid (150k) . No stamp duty luckily so I saved on that.

My neighbour sold their house 8 months later for £240,000 . This was June 2007.

I considered selling up at the time to make a tidy profit and go into rented accom, but had just got the house looking nice after a bit of a paint job etc.... and I was settled. Mortgage repayments are grand etc...

The neighbours 2 doors up are currently trying to sell. Their house went up for sale in october / november of last year for £180,000. They lowered it by £5k, and only just this week it is now down to £150,000 . It's still sitting there unsold. Their estate agent told me they have 1 guy coming to look at it this weekend, but the guys figure was more around £140k. Apart from that there was no interest at the moment.

NI is an extreme case, but since January 2006, in my area, a 3 bed terraced house has went from £130k to £240k inside 18 months. 18 Months later that has come back down to £140k .

Now you may be thinking that prices have just come back down to normality, and I would agree with you, however, I can't see it stopping at £140k. If this couple need to sell, they'll keep dropping, (and I fear they will) until someone takes them up on the offer.

I'm prepared to stick with my property for the next few years, although part of me fears house prices falling to near rateable value leaving me in atrocious negative equity for many years to come. If it wasn't for the stupidity of the boom, then my house would probably be worth £140 / £150k today. Unfortunately, some of us who manage to get a house before crazy prices occurred, will be stuck at the bottom of the ladder possibly for a while yet.

40 - 50% is probably happening right this minute, if not in the next few months from what I can see especially due to our lower salaries in NI compared with the rest of the UK.

I feel, the average house price HAS to fall back to the normal 3 x Average salary. This is the necessary reset switch for the housing market IMO with limits on house ownership (no BTL) so that the bubble does not occur again.

Also - between January - June 2006 there was an episode of Location Location Location where Kirsty Alsopp said in 5 years time, a house in Belfast if buying now will rise 50% in value. 1.5 years later, house prices were nearly up 50%. So personally I blame her for the crazy stuff that happened in NI. This was irresponsible trash to be bandied about on a TV program such as that. They really shouldn't be allowed to speculate like that on TV.

Edited January 21, 2009 by w_n_s

[Selling up]

Why would I care what a house is worth in USD?

I don't earn USD and I don't expect to buy a UK house from an American...

No more useful than pointing out that in Zimbabwe dollars, UK house prices are still soaring.

[New_Renter]

Not in Milton Keynes they are not, they drop very very slowly here,

As the old saying goes MK is the place to be.

[VeryMeanReversion]

I think the key thing to remember is that most people in the UK don't really view currency devaluation as being of any importance. Other than a holiday in europe/usa once or twice a year, it's of no thought to them.

That would include me. I couldn't care less if the £ dropped another 30%. My biggest expense by far is rent.

I'm competing for housing resources with people in my neighbourhood. They earn £'s and have savings in £'s.

When foreign currency owners want to live in my village, I'll worry about it. I dont think they would BTL over here since the rent would be paid in £'s.

VMR.

[puppee]

There has been a lot of discussion about the exchange rates - super bad for us all getting paid in GBP. However, if all your assets are in UK property, you have lost 50% of the value of your asset base in 1 year.

Why? 20% of fall in the house price and 30% because of the value of the GBP against the USD. If the house prices drop further to approximately 35-40% nominal fall from peak, will we have seen a 60-70% drop in the "value"? Looks like it to me.

As you can see from my member number, I have been around for a while. A few years ago, suggesting a 30% drop in value drew ridicule (I had thought about 40% would be right as a drop). I am horrified by the speed, acceleration and depth of this problem. The house price crash has so many faces to it.

don't figure 20% fall in house price agreed but if all assets in uk whats it got to do with usd's unless you are selling up to move to the u.s of a its got nothing to do with it

[woody]

there's a big difference between asking price and selling price. why don't you start making offers and see if anything gets accepted!

I do live abroad but still value a pint of beer in GBP. To everyone around me, values have dropped by at least 30% because of the forex change - even if you agree that selling prices haven't gone down at all.

[Guest sillybear2]

don't figure 20% fall in house price agreed but if all assets in uk whats it got to do with usd's unless you are selling up to move to the u.s of a its got nothing to do with it

Unless US or foreign investment firms start buying up UK assets and outbidding you, basically the American Wilsons.

[spivT]

there's a big difference between asking price and selling price. why don't you start making offers and see if anything gets accepted!

Exactly!! Wait a couple of weeks see if the vendor chases the price down a bit, then go in with an offer you can afford and at how much YOU value the place at......the worst they can do is say no!! There's a great deal of fat to cut off between asking and sale prices now.

No realistic offer is going to get dismissed by those genuinely wanting to sell, this isn't 2005-2007. The asshats with small portfolios or BTLers looking to release some cash are wasting EAs windows space waiting for the 'upturn' and tend to put the more shittier properties on the market. You can spot them a mile off, not necessarily high prices but not a lot going for them in terms of location, facade, size. Good fun when you check on the LR how much they paid for their holes...and then see how much they are holding out for. In a lot of cases they don't get a SINGLE viewing. This is the reality and has been for some time now. Asking prices are more EA spin now than they ever were....best to ignore or work from a starting point of 15% off asking price.

[Neil B]

40 - 50% is probably happening right this minute, if not in the next few months from what I can see especially due to our lower salaries in NI compared with the rest of the UK.

I feel, the average house price HAS to fall back to the normal 3 x Average salary. This is the necessary reset switch for the housing market IMO with limits on house ownership (no BTL) so that the bubble does not occur again.

I entirely agree.

There just aren't any more liar mortgages available to support the rediculous asking prices. Prices have to drop to match what mortgages are available. I have been shopping round for a better mortgage deal this week now that the interest rate has plummeted and it seems that I am better off sticking with my old SVR.

I did some looking around for a new mortgage on a new property at the same time and most of the lenders require on average a 20% deposit and are lending at 3 - 5 x salary. As the average wage in the UK is around £25k then it is surely a logical progression for the average house price to drop to 3-5 x £25k = £75k-£125k

[Captain Coma]

I bought my house in July 2006. This was about a year before the peak and crazy prices in Belfast NI. Cost me £149,550 for a 3 bedroom end terrace. It went on at £129,000 and sold after about 4 - 5 months for the price I paid (150k) . No stamp duty luckily so I saved on that.

My neighbour sold their house 8 months later for £240,000 . This was June 2007.

I considered selling up at the time to make a tidy profit and go into rented accom, but had just got the house looking nice after a bit of a paint job etc.... and I was settled. Mortgage repayments are grand etc...

The neighbours 2 doors up are currently trying to sell. Their house went up for sale in october / november of last year for £180,000. They lowered it by £5k, and only just this week it is now down to £150,000 . It's still sitting there unsold. Their estate agent told me they have 1 guy coming to look at it this weekend, but the guys figure was more around £140k. Apart from that there was no interest at the moment.

NI is an extreme case, but since January 2006, in my area, a 3 bed terraced house has went from £130k to £240k inside 18 months. 18 Months later that has come back down to £140k .

Now you may be thinking that prices have just come back down to normality, and I would agree with you, however, I can't see it stopping at £140k. If this couple need to sell, they'll keep dropping, (and I fear they will) until someone takes them up on the offer.

I'm prepared to stick with my property for the next few years, although part of me fears house prices falling to near rateable value leaving me in atrocious negative equity for many years to come. If it wasn't for the stupidity of the boom, then my house would probably be worth £140 / £150k today. Unfortunately, some of us who manage to get a house before crazy prices occurred, will be stuck at the bottom of the ladder possibly for a while yet.

40 - 50% is probably happening right this minute, if not in the next few months from what I can see especially due to our lower salaries in NI compared with the rest of the UK.

I feel, the average house price HAS to fall back to the normal 3 x Average salary. This is the necessary reset switch for the housing market IMO with limits on house ownership (no BTL) so that the bubble does not occur again.

Also - between January - June 2006 there was an episode of Location Location Location where Kirsty Alsopp said in 5 years time, a house in Belfast if buying now will rise 50% in value. 1.5 years later, house prices were nearly up 50%. So personally I blame her for the crazy stuff that happened in NI. This was irresponsible trash to be bandied about on a TV program such as that. They really shouldn't be allowed to speculate like that on TV.

Are you quite sure you are a bull? You sound more like one of us!

[swissy_fit]

That would include me. I couldn't care less if the £ dropped another 30%. My biggest expense by far is rent.

I'm competing for housing resources with people in my neighbourhood. They earn £'s and have savings in £'s.

When foreign currency owners want to live in my village, I'll worry about it. I dont think they would BTL over here since the rent would be paid in £'s.

VMR.

I wouldn't be so sure.

I'm discussing the idea with a friend/colleague.

He can get a 10 year fix at 3% in CHF(he's Swiss).

He can probably get a yield of 7-8% if he's careful with what he buys in the UK, his sister can help him get something at auction(she lives in London).

A good deal on the face of it - 3% of (say)200k GBP is 800CHF a month - pin money to him even if it doesn't go perfectly, you can spend that on a very posh meal out here. If he got (say) 7.5% the rent would be 2000CHF a month, save 500 for maintenance and he's well in profit. On top of that the debt is tax-deductible over here!

The only question for him is whether the GBP/CHF exchange rate can get a lot worse - it's at an historic low as it is, and in "normal" circs you might expect it to improve in 10 years and increase any profits he'd make. However as we know, these may not be normal circs, the pound may vanish in a puff of inflation in that time.

Still - if I can do these sums, so can others. Some may think it's worth a punt.