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Is There Anything That Can Slow Down This House Price Inflation?

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House prices have been going up around !0% pa around the UK and around 15% in the capital

This inflation is set to increase quite a bit over the next year.

I am concerned. Even the UK government is concerned, but they're only response is a 0.25% increase in base rates next year, which will have very littlle, if any affect, next year.

Is there anything on the horizon that will or could put downward pressure on prices.

I can think of plenty of things that will put upward pressure but very little to put downward pressure.

Sensible answers only please.

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When the ponzi runs out of money then it will stop.

However it appears that this is a long way off. Colleague just told me one of their friends have put their house up for sale, already had 5 offers and at least one is above asking price. Everyone is a winner.

I think house prices in some areas are still too low for the insanity to sink in, even worse our kids think these big numbers are now normal. As a kid I'd have thought you where nuts to suggest I'd live in a £200k house as I'd have thought a small mansion with stables etc... rather than a 4 bed house on an average estate. However people will pay this for a two bed flat.

I was looking some recent new builds in my local area which have gone up for £250k for a smallish 3 bed house. I'm sure it's lovely inside, but scrolling around website for others in the local area I could have a period 5 bed house for £230k or larger 3 bed with bigger garden for £230k. The premium for a new build is just nuts for what you get.

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It would have to be some sort of 'black swan' event, an external shock to the market unforseen by most. Candidates might be a conflict with Russia, implosion and depression in China causing a new credit crunch or (my favourite) a nasty run on the pound and spike in interest rates because of the UK's huge current account deficit. All quite improbable at the moment, but that's the nature of 'black swans'. Doesn't mean it won't happen. Anyone wanting to buy now is forced to gamble one way or another thanks to crazy low mortgage and savings rates. Take on a massive mortgage to buy and you risk getting pummeled if a crash happens, stay renting and saving and risk getting pummeled if house prices keep inflating. Hobson's choice.

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House prices have been going up around !0% pa around the UK and around 15% in the capital

This inflation is set to increase quite a bit over the next year.

I am concerned. Even the UK government is concerned, but they're only response is a 0.25% increase in base rates next year, which will have very littlle, if any affect, next year.

Is there anything on the horizon that will or could put downward pressure on prices.

I can think of plenty of things that will put upward pressure but very little to put downward pressure.

Sensible answers only please.

Plenty of reasonable possibilities. USA interest rate rise. Tax rises from next government. Scottish independence. Ukraine. Fracking gold rush tempting 'hot money' away.

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there are some biggish falls (from stupidly high prices) in walthamstow and neighbouring chingford coming through so i'm inclined to believe that mmr has finally burst the bubble

although there is nothing like a black swan event there are several smaller factors working against further rises

ffl, prospect of higher rates, first time buyers being priced out

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This inflation is set to increase quite a bit over the next year.

There might be a little more momentum, but not much.

MMR will help, and you can't carry on with H2B now that IMF fingers are pointing at overheating UK house prices, plus we'll see interest rates bumped up by 0.25 or 0.5% in the coming 18 months.

So there really isn't much more HPI to come, we're hard up against the top limits of absolute affordability.

But neither will house prices fall by all that much. Interest rates are going up, but not by much. And we're still decades away from building enough new homes to satiate the 250,000 new households that are being formed each year.

So there's very few winners in all this. If you've just signed up for a crippling mortgage then you'll see your living standards severely curtailed for the next 25-30 years as you struggle to pay it off in a low inflation environment. And if you're priced out then you'll stay priced out.

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HPI, I think is already slowing down. MMR perhaps the key factor?

The question is when and how big the crash is going to be.

From my little corner of London I see a a remarkable uptick in instruction at very unrealistic asking prices, but once on the market perhaps we will see reductions. Hopefully that will start a race to the bottom.

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Look at the land registry and the halifax, they've stopped dead and are starting to drop.

Relative to inflation they are about 30% down since 2007.

Now sure what the OP is getting at.

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It would have to be some sort of 'black swan' event, an external shock to the market unforseen by most. Candidates might be a conflict with Russia, implosion and depression in China causing a new credit crunch or (my favourite) a nasty run on the pound and spike in interest rates because of the UK's huge current account deficit. All quite improbable at the moment, but that's the nature of 'black swans'. Doesn't mean it won't happen. Anyone wanting to buy now is forced to gamble one way or another thanks to crazy low mortgage and savings rates. Take on a massive mortgage to buy and you risk getting pummeled if a crash happens, stay renting and saving and risk getting pummeled if house prices keep inflating. Hobson's choice.

The black swan event happened in 2007...the government have been trying to hold up the entire banking system and indirectly the housing market using tax payers money ever since.

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First of all you have to ask yourself WHY are people that not only are resident here but also those resident overseas are continuing to buy property.......then WHAT would make them slow down or stop.....such as :

Low and falling yields.

Tighter credit.

Higher debt interest rates.

Higher property taxes.

Falling rents.

Less state subsidies/SMI.

Greater tenant security/ protection.

Better returns and growth in other investments.

More building. inc HA/council homes, providing affordable rents.

It would't take much policy change for sentiment to change.....where there is a will there is a way. ;)

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First of all you have to ask yourself WHY are people that not only are resident here but also those resident overseas are continuing to buy property.......then WHAT would make them slow down or stop.....such as :

Low and falling yields.

Tighter credit.

Higher debt interest rates.

Higher property taxes.

Falling rents.

Less state subsidies/SMI.

Greater tenant security/ protection.

Better returns and growth in other investments.

More building. inc HA/council homes, providing affordable rents.

It would't take much policy change for sentiment to change.....where there is a will there is a way. ;)

You missed the biggest and most important one.

Price falls.

When prices start to fall, investors always jump ship. Yes, always - you only have to look at history to find evidence of that. Until widespread reporting of prices begin to fall (which they have, not that you will hear it in the media) the bubble will continue.

Once the 'investors' realise that they lost money last month, they won't be so keen on pumping more in and since the UK housing market is now primarily investment driven I would expect to see more volatility / erratic behaviour.

Not to forget what was once a very illiquid market (property) is now much more liquid as it is ruled by cash investors.

I really wouldn't be surprised if we saw London fall 20% over a period of a few months, only to shoot back up again 6 months later, then fall again etc.

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richardsal which corner of london?

i think sentiment will play an important roll

a few months of negative growth may make people hold out for a better deal

Balham, Tooting, Wandsworth

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You missed the biggest and most important one.

Price falls.

Ah,but......It will have to take a trigger or two for the prices to fall....then it will be downhill all the way.....the right event is the cause the price falls is the effect..... at the moment here and now nothing has changed in the right direction, only the wrong. ;)

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just had a quick look on rightmove/property bee at balham

some nice price cuts there!

yes but after a massive hike in asking. Directionally good news though!

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winkie you don't think mmr could be the trigger?

Hard to say, early days.....If the government together with the lenders want and are in a position to allow prices to return to some kind of healthy normality they can and will make it happen, not that hard to do if the desire and inclination is there....lots of different forces pulling in different directions....when the time is right, all the stops will be pulled. ;)

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winkie you don't think mmr could be the trigger?

FLS has been withdrawn. The credit impulse from HtB2 is wearing off. These declining subsidies are the trigger, without them UK houses are simply unaffordable. They can be renewed in some form or other by Osborne, of course, but he'd have to take money from elsewhere or run up his borrowing again to do so. Neither option seems politically palatable at the moment.

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time is running out for the government

these manipulations take months to filter through

will they call a cobra meeting to come up with more ways to sustain the "recovery" in house prices before the election?

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end of the credit cycle; yield curve inversion; recession (maybe aggressive macro pru/counter cyclical measures but doubt they'll have a significant impact and anyway they'll lag as usual)

Usually does the job

Edited by R K

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FLS has been withdrawn. The credit impulse from HtB2 is wearing off. These declining subsidies are the trigger, without them UK houses are simply unaffordable. They can be renewed in some form or other by Osborne, of course, but he'd have to take money from elsewhere or run up his borrowing again to do so. Neither option seems politically palatable at the moment.

and yet FTBs are paying something like 28% of income compared to the long run average of closer to 50%. So that's probably not true for a long time yet.

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