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More Nomimal Falls To Come?

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So, someone please remind me again why people think there will be decent sized nomimal falls in House prices in places like London, that don't seem to be going down much any more.

I'm starting to believe that the BoE can hold interest rates down low for another five years, gilts markets don't seem to mind now. I think we'll see some more cost push inflation. But wages won't be going up and people will be getting poorer. And under a low interest rate regime, them slashing the public sector won't have that much affect.

Thoughts, opinions?

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They've been overpriced for years. Plus, with interest rates so low, they aren't that overpriced.

Spending cuts

Tax rises

Interest rate rises

Credit tightening

Job losses

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Far out. A thread discussing house prices and nobody wants to answer.

Sorry if my question was too dull.

The truth is it's a long haul back from the outer reaches of the apocalypse to a mere drop in house prices. :lol:

Maybe the site should just be renamed 'Crash!'

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Student debts

Credit card debts

Cost of living rising

Wages falling

Tenants defaulting

Sentiment falling

Equity falling

BTL dead

So do you think it's going to be a long protracted slide? It seems to me the market can't move on from where it is now. As mortgage lending isn't going to be "getting back to normal".

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That's more like it !!!

....And inflation is coming so interest rates will have to rise. Loss of confidence is reaching a tipping point, where people are too scared to buy.

Do not be fooled by the argument that house prices rae 'not that exoensive at these rates'. The fact is that IR's are at their lowest for centuries. There is a reason!! The world economy is in shitsville and shrinking again. EXCESSIVE ATTEMPTS TO PREVENT A 'DEPRESSION' have failed and involved massive printing exercises. It is becoming an inflationary spiral and interest rates will rise quite rapidly through next year.

In most times rates move between 5-8%. That connotes mortgages of 7-11%. That is 2-3 times more expensive than now. Still think property is cheap? Mortgages are going to be much more tightly controlled in future and that connotes real nominal falls. The only way to look at it is the availbility of credit and by income multiples. When these return to norms, so will property prices. The argument about shortgaes and overpopulation is nonsense, otherwise you could not have a property crash in this country or Japan. Both of those places have had them (70% fall in japan) and we will have one now.

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So do you think it's going to be a long protracted slide? It seems to me the market can't move on from where it is now. As mortgage lending isn't going to be "getting back to normal".

approvals are falling.

Rates are at bottom.

theyve tried: 6 times joint salary, buy with a friend, buy with a stranger, buy with 5 strangers, IO, half buy half rent, everything to ensure entrants to the market are totally stretched.

so, lets agree, a new entrant is going to be stretched....lets say they get their 5 times joint mortgage with BOMD deposit.

they borrow £150K. that costs them say £880 per month repayment over 25 years. (5%)

if rates rise to 6%, and rates are only going up, £880 gets them £137,000

thats a 13K drop.....so a 1% rise in rates reduces borrowing power by around 8%...instantly...and just about wipes out the BOMD deposit.

a 2% rise to 7% takes the borrwing to £124,000.

OK the the new entrant is unaffected if they have a fixed rate, and lets assume they have....but its not them that determines the value, its the new entrants.

And my new entrants were very well paid.

EDIT...is there some weird spell checker at work here?

Edited by Bloo Loo

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So, someone please remind me again why people think there will be decent sized nomimal falls in House prices in places like London, that don't seem to be going down much any more.

I'm starting to believe that the BoE can hold interest rates down low for another five years, gilts markets don't seem to mind now. I think we'll see some more cost push inflation. But wages won't be going up and people will be getting poorer. And under a low interest rate regime, them slashing the public sector won't have that much affect.

Thoughts, opinions?

SENTIMENT - now momentum has changed direction you'll be amazed how soon it builds. On another thread someone mentioned a survey that found a quarter of homeowners believed the value of their home had dropped in the past month, and presumably anyone thinking of selling (or buying for that matter) will have been paying more attention to the (overwhelmingly bearish) media reports of late so the proportion would be higher.

This negative sentiment does wonders for a seller's 'wilingness to negotiate' and a buyers willingness to proceed. Look at late 07 - early 09 - interest rates were hardly astronomical and the job losses/wage cuts had only just begun and prices fell circa 20-25% in the space of 18 months.

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Thoughts, opinions?

All indications point to the start of the next leg down.. I really don't think there is much doubt about that on here.

The real question is how much will they let them drop, and how will they bail them out. GoldmanSquid want the US government to stump up another cool $1tn (link).

If the US stimulate would that create enough global demand (and thus jobs in export industry) to help prop up prices? I don't know.

Will we also QE 2? There is probably a good chance.

My personal finger in the air guestimate is that we'll see up to 10-15% falls.. after that, I expect more printing and the same kind of measures we saw last time.

Edited by libspero

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In previous crashes interest rates went up and the market crashed. This time they went up slightly , then the credit crunch hit, and now we have ZIRP. It's been (approx ) 13 months on a base rate of .5 percent. I can see nominal prices sliding a little bit, but I'm not sure about another sizeable leg downwards without interest rate rises.

If you have a sizeable deposit (say 50%), with interest rates where they are (i.e. not getting anything on your savings), you might as well buy a house (from motivated seller, i.e. find bargain) and use the low interest rates to pay off capital. Would save you from a hyper inflationary holocaust if it happens.

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So, someone please remind me again why people think there will be decent sized nomimal falls in House prices in places like London, that don't seem to be going down much any more.

I'm starting to believe that the BoE can hold interest rates down low for another five years, gilts markets don't seem to mind now. I think we'll see some more cost push inflation. But wages won't be going up and people will be getting poorer. And under a low interest rate regime, them slashing the public sector won't have that much affect.

Thoughts, opinions?

Is the UK government massively supporting house prices? Any falls would be as a result of failure by the government to prop up prices.

If housing fell say 30-50 percent (what is needed for a sustainable market) would that wipe out most of the assets on the banks balance sheets and put the UK is deep trouble again.

My big guess is interest rates will stay low and inflation will go high (10 percent plus) and house prices will not fall much nominally. Which for someone in a 2 bed rented cottage with one child and another planned is a grim prospect of not being able to buy without a hugh risk (risk the government fails and house prices do collapse (as in US, ireland)).

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In previous crashes interest rates went up and the market crashed. This time they went up slightly , then the credit crunch hit, and now we have ZIRP. It's been (approx ) 13 months on a base rate of .5 percent. I can see nominal prices sliding a little bit, but I'm not sure about another sizeable leg downwards without interest rate rises.

I think you're getting too hung up on the 0.5% interest rates. Where do you know that you can borrow at 0.5%?

The low interest rate helps keep supply off the market and will help the banks repair their balance sheets, but that is about it IMHO.

Although new mortgage rates are a bit lower than before the first (part of the) crash, lending criteria has tightened.. enough (IMHO) to off-set this.

Then you've got the job losses coming up, the drop in sentiment/speculative buyers, and the pent-up supply slowly creeping onto the market.

Edited by libspero

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So, someone please remind me again why people think there will be decent sized nomimal falls in House prices in places like London, that don't seem to be going down much any more.

I'm starting to believe that the BoE can hold interest rates down low for another five years, gilts markets don't seem to mind now. I think we'll see some more cost push inflation. But wages won't be going up and people will be getting poorer. And under a low interest rate regime, them slashing the public sector won't have that much affect.

Thoughts, opinions?

I think there are two very different stories. London and to an extent the South East won't see much in the way of price falls. The rest of the country will see big price falls. It's all down to economics and how our economy is totally dominated by government policy, and how that policy massively favours the global financial trading hub of London and the South East. Here are my reasons:

Government policy (I'm talking the last government here, but the new one hasn't made any big steps in a different direction and I don't expect them to) helps London because it helps the high finance industry and harms the "regions" (I hate the way the London press calls the rest of the UK the 'regions'). QE was a massive boon to banks and financials as it supported asset prices and increased the volume of money churning around the markets. Interest rate spreads that banks, whose major trading operations are all based in London, are earning now unprecedented. They're doing well in brokering big deals selling UK companies to foreign businesses (e.g. Cadbury's buyout - London based firms pushing the deal made hundreds of millions in fees - a factory get's closed down in Bristol once Kraft are in control). They're doing well trading debt as the whole country plunges deeper into the red - London finance firms make plenty in brokering sterling bond sales to China so. Of course this activity means that the pound stays high against the yuan and UK manufacturers (all outside London and SE) can't compete and continue to shed jobs. Now, most importantly, government austerity measures are going to hammer the 'regions' because they depend on government spending to a much greater degree than London. Basically my take on it is that London is a combination of two things - it's a world class economy in its own right, it has great vibrancy, is a major tourist destination, has a young, mobile well educated and motivated workforce and it subsidises the rest of the UK economy. On the other hand London is a parasitic leech that makes its money by selling debt to the rest of the country, by asset stripping it's industries and by taking the nations brightest kids away from other worthwhile professions to spend their youth slaving in the finance houses.

Another factor in all this is government infrastructure projects. Off the top of my head, here's a list of the big projects of the last few years: Heathrow T5, Wembley stadium, Olympics 2012, crossrail, west coast mainline upgrade, jubilee line extension. It's almost all in bloody London! And when Labour got in they said they'd address the north south divide! Too right they did.

So, to conculde, unless the government stops directing economic policy to help the financials and instead looks at the bigger picture, I think that house prices will fall in the 'regions' and will stay high in London and the SE. So if you have a good secure job outside the SE and you want to buy a nice home you're looking good. If you live in London, but don't work for an investment bank or a hedge fund, your f**ked!

cheers.

edit: I should perhaps add that I live in London, I don't own property, I don't work for a bank and I'm bitter.

Edited by gimble

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I think you're getting too hung up on the 0.5% interest rates. Where do you know that you can borrow at 0.5%?

The low interest rate help keeps supply off the market and will help the banks repair their balance sheets, but that is about it IMHO.

Although new mortgage rates are a bit lower than before the first (part of the) crash, lending criteria has tightened.. enough (IMHO) to off-set this.

Then you've got the job losses coming up, the drop in sentiment/speculative buyers, and the pent-up supply slowly creeping onto the market.

A 0.5 percent base rate means you can get a tracker at 2.2 percent. You can even get a 4.2 percent 5 year fix.

Pent up supply ... I really like that idea. But, it seems as the public sector braces for cuts, the private sector seems to be picking up again. And the government pays peoples interest doesn't it?

Hardly anyone seems to be a forced seller at present. :( It's sad :lol:

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A 0.5 percent base rate means you can get a tracker at 2.2 percent. You can even get a 4.2 percent 5 year fix.

Compare the meercat again but for typical LTV of 85%-90% ;)

Pent up supply ... I really like that idea. But, it seems as the public sector braces for cuts, the private sector seems to be picking up again. And the government pays peoples interest doesn't it?

Hardly anyone seems to be a forced seller at present. :( It's sad :lol:

I'd agree with that.. preventing forced selling was/is their main weapon against rapid price drops IMHO

Pent up supply, I was thinking more about death, divorce and people moving/retiring abroad (or for jobs). Not forced sellers per-se.. but more motivated than others.

Edit: Silly mistake :rolleyes:

Edited by libspero

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Spending cuts

Tax rises

Interest rate rises

Credit tightening

Job losses

Of the above, credit tightening would be the most likely candidate. If people can't get the credit to buy houses, prices have to fall.

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So, someone please remind me again why people think there will be decent sized nomimal falls in House prices in places like London, that don't seem to be going down much any more...............

Thoughts, opinions?

I don't think there will be decent sized falls in London. Given that there are so many people with huge amounts of cash there, now.

There always were loads of hideously wealthy City folk, but there's more hot money from Russia and elsewhere propping up the whole shebang.

The duffer areas will not be spared though.

In the last crash of 1991 I remember people in half-decent homes taking a severe haircut of prices in house sales.

Unless there is 1930s style depression it aint gonna happen in London this time.

More than happy if I'm wrong though.:blink:

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The housing benefit cap will decimate prices in many middling to grotty areas of London. I am thinking Acton/Hackney here.

Also there is a big gap in pay/expected pay between bankers etc and everyone else. And for every oligarch/sheikh there are thousands of clerks/accounts assistants getting by on £22k a year for whom a £250/300k FTB property is never going to happen.

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My vision of the proprty market is mor like a pyramid than a ladder and the way I see it is that if the foundation of the pyramid is not solid it cannot work.

The base of the pyramid are first time buyers and all FTB without a mum and dad deposit are now struggling to get anywhere close to buying thir first property.

If the FTB cannot buy how the ex FTB couple with another kid on the way is going to be able to buy their new house with more space?

Yes base rate is at record low but does not mean a thing to the FTB that still have to struggle to find £17K out of their starter salaries and pray that a bank will allow them to borrow the 90%LTV at 7% (or almost) interest.

There are always people who need to move and for that need to sale their current property, unfortunatly if there is noone who want or can afford their 2 up 2 down, they won't go anywhere.

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under a low interest rate regime, them slashing the public sector won't have that much affect.

Thoughts, opinions?

Well, if you lose your job, it doesn't matter so much whether your mortgage interest rate is 2% or 10% - you have no money to pay.

(And n.b: "won't have that much effect" or "won't affect house prices much")

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  • 259 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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