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We currently have a stalemate.

Buyers who will not budge on price because there is no reason to, and Vendors who are adopting the same.

Only a marked rise in interest rates will push Vendors over the edge, or massive jobcuts without hope of re-employment.

From what I am seeing, there is stagnation and the pressure is being taken up with a lot of people who are now renting and intending to rent in the future.

We are heading for a European style housing market where the vast majority rent for flexibility and economics and Landlords dominate the ownership.

In my veiw this could be a goog thing for the British Economy as it will remove the boom to bust cycles forever.

With real inflation running at over 4% I think it is hard to imagine what gains anyone is going to make by exiting the market and renting. On the face of it the figures stack up to rent, however will it be possible to ever re-enter the market as inflation and tax takes its toll on the Equity realised from the STR and any other savings.

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We currently have a stalemate.

Buyers who will not budge on price because there is no reason to, and Vendors who are adopting the same.

Only a marked rise in interest rates will push Vendors over the edge, or massive jobcuts without hope of re-employment.

From what I am seeing, there is stagnation and the pressure is being taken up with a lot of people who are now renting and intending to rent in the future.

We are heading for a European style housing market where the vast majority rent for flexibility and economics and Landlords dominate the ownership.

In my veiw this could be a goog thing for the British Economy as it will remove the boom to bust cycles forever.

With real inflation running at over 4% I think it is hard to imagine what gains anyone is going to make by exiting the market and renting. On the face of it the figures stack up to rent, however will it be possible to ever re-enter the market as inflation and tax takes its toll on the Equity realised from the STR and any other savings.

laurejon Have you read the forum article from slater 14, money week - it's bad. If not go have a read. Or maybe you know best.

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1. Job losses in the private sector are rising

2. Only thing propping up housing is Gordon Brown spending money he hasnt got to employ people.

3. We will see a dead cat bounce - in 2 years

4. New build are going down the pan - BTL'ers are losing big time as they signed up "off plane" 2 years ago, these properties are now valued less than they were at build stage 1 - banks wont give them the money - they are losing deposits or buying with no chance of a return for 10 - 20 years!!!

Some key points here.

1. Job losses in the private sector are rising

These losses will streamline the economy, I think the less the Government spend the better the economy.

2. Only thing propping up housing is Gordon Brown spending money he hasnt got to employ people.

Why?. Who says that Gordons spending is the only thing propping up the housing market. My business has not connections whatsover with Gordons Spending plans and never will, I suspect that is the case for most people. My biggest threat is Tony Blairs assistance in BPO to Inida

3 We will see a dead cat bounce - in 2 years

I reckon three years to a crash.

4. New build are going down the pan - BTL'ers are losing big time as they signed up "off plan" 2 years ago, these properties are now valued less than they were at build stage 1 - banks wont give them the money - they are losing deposits or buying with no chance of a return for 10 - 20 years!!!

I would expect them to forgoe their deposits, and I would also be expecting the Developers to hold the development.

Everyone has their take on things, however I do not yet see the beginings of a crash scenario, its a soft landing at present. Crash is way way off.

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We currently have a stalemate.

Buyers who will not budge on price because there is no reason to, and Vendors who are adopting the same.

Sometimes you seem to miss the simple things - most buyers - or at least most FTBs needed to keep property sales going - simply cannot afford to buy property and it will need to fall A LOT for it to become affordable. It's not they they won't budge on price. A 200k flat is simply 100k too expensive for most FTBs.

I can't see many people now rushing to re-mortgage to release 30k of equity to put down on a BTL flat. Why would you do that at the beginning of a falling market? The facts seem to support this. I can show you a development of 2 bed flats near me which is still half empty after 18 months.

Other blocks of what until recently would definitely be being sold to the investment market i.e. 2 bed flats - are having 30k slashed off the price and still not finding buyers. I repeat - who is going to buy these now? Never mind the ones bought 2 years ago. These new builds are going to set the prices and, as I see it, they are going to have another 30 or 40k off before FTBs (and then only high earning ones) can think about taking them on. I can't see a repeat of the BTL frenzy again for another 10 years. Sure you'll still get people buying crappy old terraces and renting the rooms out individually but the BTL boom is over. The BTL boom is what has sustained house prices. The party is over.

Only a marked rise in interest rates will push Vendors over the edge, or massive jobcuts without hope of re-employment.

I think ultimately the price of new-builds will condition the market. The new 4 bed stuff round here (apart from the really expensive stuff - that still seems to shift) but the 400k to 500k stuff is sitting there indefinitely at the moment. I know of one on the market for over a year. Sooner or later the developer will either go broke and the bank will sell it cheap, or 100k has to come off the price.

From what I am seeing, there is stagnation and the pressure is being taken up with a lot of people who are now renting and intending to rent in the future.

We are heading for a European style housing market where the vast majority rent for flexibility and economics and Landlords dominate the ownership.

In my veiw this could be a goog thing for the British Economy as it will remove the boom to bust cycles forever.

With real inflation running at over 4% I think it is hard to imagine what gains anyone is going to make by exiting the market and renting. On the face of it the figures stack up to rent, however will it be possible to ever re-enter the market as inflation and tax takes its toll on the Equity realised from the STR and any other savings.

The gains I have made by exiting the market and renting are simple.

I am not paying a mortgage any more.

The interest on my capital pays my rent and a lot more besides.

House prices are falling - and have been for about 10 months according to the official figures.

I have no doubt I made the right choice - exiting the market will protect my capital in a way that staying in wouldn't.

Okay a bit of inflation might theoretically erode my capital but, as the capital I took out of the house will eventually be used to buy another (much cheaper but the same size and quality) in a few years time - who cares?

My investments so far are keeping well ahead of inflation anyway.

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I can see your theory Marina.

But it is all based on your "I can feel it in my water" philosophy.

What if house prices stagnate whilst your money in real terms loses 4% per annum in inflation?.

What if they stagnate and then kick off again?.

Are you working?. Have you asked for a self assesment form from the IR, and if so do you declare the interest on your savings. Remember its only taxed at 20% if you are a high taxpayer then you will have another bill to pay on the interest post self assesment?.

I think I remember you saying you had several hundred K in savings now from the STR. That will surely put you into the higher tax bracket and that tax will impact on your savings surely.?.

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I can see your theory Marina.

But it is all based on your "I can feel it in my water" philosophy.

I think my philosophy is based on experience and observation of what is going on in the world around me. I don't think its's a 'feel it in my water thing' - it's a little more scientific than that.

What if house prices stagnate whilst your money in real terms loses 4% per annum in inflation?.

I am not daft enough to let my money sit and lose value - I have taken advantage of every tax loophole I can - I've got some in the bank and some in other investments that have done pretty well for me so far. However, I know I am taking a risk - it's just a different risk from leaving a chunk of my capital tied up in a depreciating asset.

What if they stagnate and then kick off again?. I will have taken a gamble and lost. I took a gamble and won last time round. On the whole I feel at least twice as certain about this crash as I did about the last - however, again I'm not daft enough to think I am infallible. I know I am gambling - but I think the deck is stacked in my favour at the moment. I believe lots of people would like to STR but can't be bothered with the hassle. Personally I find loading a removal lorry up and moving to be a pleasant break in life's routine - the only thing that bugs me about moving is handing over a fistful of my hard earned to a bloody estate agent. I would put the chances of me being caught out of the market i.e. prices suddenly rising so I lose out by tens of thousands of pounds at 100 to 1 in my favour.

Are you working?. Have you asked for a self assesment form from the IR, and if so do you declare the interest on your savings. Remember its only taxed at 20% if you are a high taxpayer then you will have another bill to pay on the interest post self assesment?.

I think I remember you saying you had several hundred K in savings now from the STR. That will surely put you into the higher tax bracket and that tax will impact on your savings surely.?.

I don't really want to get into my personal finances here. I had a good payout from a dot com adventure a few years ago that, stupidly, I did not invest in property! - as even in 2002 I thought it couldn't go any higher. So I have a number of different investments - all of which are working harder for me than the house I sold 18 months ago which I reckon I could buy back for a bit less than I got for it (not a huge amount admittedly but we still have a couple of years for this thing to run its downward course). I know how to minimize my tax bill and, of course, I no longer have a mortgage.

Finally, if I do get caught out of the market, that will be the final spur to get me out of this place.

I feel good about things and am really glad I STRed. But, as I said above, I could be wrong. C'est la vie.

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Marina thanks for that I admire your spirit. You have obviously thought it through and added it all up.

I too thought that property would die a death, however that was back in 2000.

Fortunately I only offloaded the property investments as opposed to the principal home.

The fact that it has not crashed and should have back in 2000 is the reason behind my thinking that a crash just isnt happening. I reckon I will hop back into the rental market when it does using my pitifull savings from the sale of rental property back in 2000 however I am under no illusions I think I will be waiting a very long time.

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In the U.K. stagnation tends to happen more at the bottom of the market and not at the top .... ?

====================================

Very Good Point.

Stagnation happens in a very stable market.

At the moment there is gross instability:-

Overvaluation....Massive debt....Zero capital gain for BTL.....

a rapidly downward trend in HPI...."high" IR (relatively

speaking, I know)....very low FTB into the market....

unstable oil prices .... rising inflation....a slowing

economy....and a stalled housing market

In my own view, the snowball is poised at the top

of the mountain.... and has just started rolling...

How far it rolls downj the mountainside before

an obstacle stops it, is my only question.

And this is not all talk - I have managed all

my resources based on what I believe is happening.

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"The way I tend to think of it is that a soft landing requires everything to happen just right and for people not to panic."

====================================

Oh - come, come.

Surely people buying houses will appreciate the state of the

economy and the need for responsible capitalism... they

will clearly consider the nation's need for orderly behaviour

and put that above their own concerns, offering the full

asking price (out of sheer altruism and national loyalty)

thus preventing a crash, rather than negotiating with a

greedy glint in their eye, playing brinksmanship with the

vendor and beating the price down to the absolute rock

bottom price..... just like they did in the last crash.

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" As far as I can tell the mid-70s crash involved no nominal falls; the early-90s involved only modest(<10%) nominal falls.

Inflation won't come to the rescue this time (barring a major change in economic climate)

Hope someone can explain why I'm wrong!"

============================================

I can tell you from my personal experience that your figures are

not correct.

I bought in 1983 for £33K - 3 bed end terrace in

the south east.

By 1991 or so, it was worth about £90K-- based

on advertised asking prices in the papers.

Due to circumstances I was forced to sell at the worst

possible time (1994) .... for......

£60K.

These were close to average prices for the time.

It was a very real drop of exactly 33%.

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Thanks for those examples - I hadn't realised there were such big falls last time. I was going by some data (which I can't find now), which showed changes for the whole country each year - so must have masked those big local changes.

Just looking at the nationwide data http://www.nationwide.co.uk/hpi/downloads/..._since_1952.xls

and that does indeed show a peak-to-trough fall from £62,782 to £50,128 - a solid 20% (give or take)...

What's more that 20% is still a lot less than the drops 'burntbefore' and 'justanewbie' suffered. I would guess the figure is softened by smaller falls in areas that saw smaller rises. Given that this time, everywhere seems to be caught up in the boom, I would imagine the bust could be equally widespread, and the headline figure correspondingly more dramatic.

In any case I stand corrected (and reassured). Thanks everyone :)

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Take a look at this property price index graph from Singapore:

res_prop_idx.jpg

Stagnation can happen.  The market dynamics are quite different here in Singapore (state subsidised housing is the norm for 80%+ of the population), but essentially a lot of private owners are refusing to sell at a significant loss.  Renting here is unbelievably good value though.

JY

Stagnation can indeed happen but that graph shows stagnation after a big fall!

And there definitely was a big fall- my parents bought a flat there for 75% of what it would have cost at the peak.

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Stagnation can indeed happen but that graph shows stagnation after a big fall!

And there definitely was a big fall- my parents bought a flat there for 75% of what it would have cost at the peak.

Yes, but many are holding on to the historic prices and not putting their house up for sale reducing supply of good private property to a trickle. Just because the transactions that do occur are at reduced prices (price for the whole market is set at the margin after all) does not mean that everyone is rushing to sell here: they can afford to sit it out, on the assumption that prices will come back.

Useful evidence that stagnation can occur, I thought.

JY

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Due to circumstances I was forced to sell at the worst

possible time (1994) .... for......

£60K.

These were close to average prices for the time.

It was a very real drop of exactly 33%.

A forced sale would indeed make the house price cheaper. Forced Sales are open to purchasers who have the readies and can buy on the spot, as there are less of them they pay less.

So 33% is not indicative of the housing market, more your personal circumstances as the sale was motivated by other reasons.

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Stagnation in real estate markets can and does happen ... just not in the UK.

My local market (Sydney, Australia) seems to follow a cycle of boom, followed by a 10-15% drop, followed by an extended period of stagnation. We rarely see the 30-40% drops in house prices you get in the UK, and our troughs are shallower and longer.

Australia is 6-12 months ahead of the UK in the current cycle, and despite stories about a real estate crash in Australia, no crash has eventuated. We've seen prices fall 10-15% during 2004, but most indicators (housing finance etc) have levelled off in 2005, while some markets (such as Perth) continue to boom.

There seems to be a consensus emerging in Australia that in the absence of some major shock to the economy the housing market won't crash, rather it will stagnate for a decade or more:

http://www.propertyreview.com.au/archives/...9062005010.html

Get set for extended stagnation

The experience after the 1930s and 1970s house price bubbles ended suggests that an extended period of weak house prices is likely. We continue to think that a long drawn out correction in house prices is more likely than a 1930s/Japanese-style crash. For a crash to occur forced selling by home owners would be required and this seems unlikely in the absence of much higher interest rates or unemployment, both of which seem unlikely. While some forecasters talk of interest rates heading to 9% or so preceding a sharp fall in house prices this seems unlikely. The RBA is well aware of the sensitivity of Australian households to higher interest rates and the associated risks.

I'm not saying this means there won't be a crash in the UK (because the UK property market has historically been far more susceptible to crashes than Australia) but you can't rule out stagnation as a possible outcome.

SydneyMedianHousePrices.jpg

post-1695-1118553645_thumb.jpg

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I agree completely, I have been saying this for a few months now and I'm glad a few more people are starting to see this. I thought I must be going mad.

We have a soft landing, it will stay with us for months to come because people selling their houses have no need to accept lower prices, so they WON'T. This is the prevailing sentiment at the moment.

The vast majority of movers are discretionary moves - i.e. they don't HAVE to move, they would just like to move. So, if you can't get the price you are after, then you'll just stay put and save the money, you were about to spend.

IRs have been at 4.75% for 10 months now, if this was going to tip people into financial distress it would have happened by now. It hasn't.

This thing is going to tick along for a long while yet, until a negative trigger comes along.

All the time, people are getting used to high house prices and this means people are conditioned to it being this way. People then start to change the way they behave financially, accepting high prices. If this lasts long enough then you get the paradigm shift.

I am beginning to worry that this may be just what we get, given that every one I talk to is accepting of the status quo. Just because HPCer's say it can't happen, doesn't mean it won't. They said we couldn't have a soft landing and we've got one !

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We have a soft landing, it will stay with us for months to come because people selling their houses have no need to accept lower prices, so they WON'T. This is the prevailing sentiment at the moment.

<snip>

This thing is going to tick along for a long while yet, until a negative trigger comes along.

Dont discount the negative effect that lack of house price appreciation will have on consumer spending, a large increase of which has been driven by house price appreciation and equity withdrawal. The debt burden as a percent of household income is higher than its ever been. Low interest rates wont save the day, they've only increased the purchasing power of consumers and so driven up prices and increased debt. Without the several percentage points of increased consumer spending this wealth effect has added to GDP many economies would now be in recession. Stagnation will affect consumer spending.

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The vast majority of movers are discretionary moves - i.e. they don't HAVE to move, they would just like to move. So, if you can't get the price you are after, then you'll just stay put and save the money, you were about to spend.

I can see plenty of forced sellers:-

- Over-geared BTLer's who've used equity rises to buy more property in the

expectation of further capital rises (plenty of them). Slight falls will have

disasterous consequences fopr these people.

- BTLer's in general who are in it for the 'long term' and don't see the expected

capital rises. They will quickly realise that subsidising tenants isn't good

business sense and be forced to sell.

- FTB's who've bought into the must 'get on the ladder at all costs with as much

debt as possible now' trap. When they realise they can't service the mortgage

or the fixed term deal they were on comes to an end, they will be forced to

sell.

- Those forced to sell by economic circumstances, job losses etc.

- All those of the above who can't pay their mortgage and get repossessed

Edited by JST
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I agree completely, I have been saying this for a few months now and I'm glad a few more people are starting to see this. I thought I must be going mad.

We have a soft landing, it will stay with us for months to come because people selling their houses have no need to accept lower prices, so they WON'T. This is the prevailing sentiment at the moment.

The vast majority of movers are discretionary moves - i.e. they don't HAVE to move, they would just like to move. So, if you can't get the price you are after, then you'll just stay put and save the money, you were about to spend.

IRs have been at 4.75% for 10 months now, if this was going to tip people into financial distress it would have happened by now. It hasn't.

This thing is going to tick along for a long while yet, until a negative trigger comes along.

All the time, people are getting used to high house prices and this means people are conditioned to it being this way. People then start to change the way they behave financially, accepting high prices. If this lasts long enough then you get the paradigm shift.

I am beginning to worry that this may be just what we get, given that every one I talk to is accepting of the status quo. Just because HPCer's say it can't happen, doesn't mean it won't. They said we couldn't have a soft landing and we've got one !

What defines the soft landing? That because HPI doesn't do an instant about-turn and head straight back down then that's the soft-landing? Naturally that's what the VIs say has happened, but they would. I see that also on this forum. Some people expecting just that to happen, for prices to utterly collapse over a 12 month period or some such. It just isn't realistic. What is happening at present is exactly what one would expect to happen, and without a 'trigger' it will take a small number of years to play out.

With regard to the point about high prices being accepted as the norm, that is already true. Prices are high and have been for some time. The expectations of the general public will always be based on the situation over a preceding short period of time, generally arounf two years, and ignoring what has happened histrorically. If prices have risen for the previous two years, that is what will continue ad infinitum. If they have stayed level for two years that's the status quo (which as has been said brings its own problems). And when they've been falling for a similar time, the game really is all over.

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I think you need to define the term wealthy, I'd imagine most BTL are poorer on paper than me. Not because I have wads of cash but because they have ton's of debt.

I read somewhere recently that most btl property is aquired with cash not loans, is that true?

One thing is that we have recently come through a period when quite a few investors have become at least a bit sceptical about the stock market and have been seeking alternatives. Perhaps this partly explains the continued interest in btl despite high purchase prices reducing relative returns.

In recent years I have worked for several firms connected with luxury yacht building. Know of one firm with one yacht under construction at £150,000,000 and two more on order at over £100,000,000. - still plenty of people with not enough life left to spend their money in.

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Not for the 526,200 properties that were acquired with a BTL loan:

http://www.cml.org.uk/servlet/dycon/zt-cml...M6A'!A1

Thanks for the interesting information. The figures suggest that the average btl mortgage is about £100,000 so I guess this must be quite a high proportion of the average btl purchase price, given that btl properties seem to be mostly at the lower end of the market.

I looked at some of the other statistics on the website and noted that in 2004 the total number of mortgages was 1245000, so if there were 526200 btl mortgages then 42% mortgages were btl. That seems an impossibly high percentage to me, although I know that btl has been increasingly popular I would not have thought it could account for quite such a slice of all mortgages, maybe I am reading something wrong.

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I looked at some of the other statistics on the website and noted that in 2004 the total number of mortgages was 1245000, so if there were 526200 btl mortgages then 42% mortgages were btl. That seems an impossibly high percentage to me, although I know that btl has been increasingly popular I would not have thought it could account for quite such a slice of all mortgages, maybe I am reading something wrong.

http://www.marketresearch.com/map/prod/761750.html

http://www.cml.org.uk/servlet/dycon/zt-cml...eases_2003_0204

The Council of Mortgage Lenders' members are banks, building societies and other lenders who together undertake around 98% of all residential mortgage lending in the UK. There are more than 11 million mortgages in the UK, with loans outstanding to the value of more than £600 billion.
Market Size

There Are Over 11 Million Mortgage Accounts In The UK

So official BTL mortgages amount to around 6% of the total mortgage market. However, I suspect this significantly under-reports the number of BTL's, as many BTLers let out their properties using residential loans without telling their mortgage lender.

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  • 442 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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