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Ignorant Steve

Two Tier Crash

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It's generally accepted that 2 bed 2 bath flats are hugely over supplied in many areas. However houses are not - they haven't been selling because of uncertainty in the public mind as to what prices will do.

I think the following scenario is entirely plausible for houses:

1) VI hype the market all through winter on the back of the "buoyant" autumn

2) Spring bounce predicted and announced as fact in Feb

3) Rates get cut or don't increase

4) Public confidence in house prices increase

5) Sales improve enough to keep chains proceedable.

6) Public confidence reinforced.

I think that's enough to carry the house market all the way through 2006 and probably through to late summer 2007 before the debt overload really kicks in.

Price corrections in houses will only really become noticeable to the public in late 2008 or even 2009.

New build 2 bed flats in contrast will crash next year, and probably take existing flats with them. Good flats in good locations will sell and will provide enough upward movement to support the house market.

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Youre wrong im right. About everything. ok.

I am not so sure .... debt is a huge issue but with low interest rates it is currently managable for the bulk of the home-owning public.

I think the next spring-bounce will be a non-starter but the market will limp on with small rallies and dips in the 0.something margin. Stagnation is entirely possible if rates stay as they are or decrease slightly.....

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Expectation of asset inflation has helped fuel this rise. Lets wait to see sentiment change.

On a different note. We hear a lot about the 3.7 multiple as the constant to which the house price differential should revert, is it not possible that a new equilibrium point could be established, such as 4.4 etc etc? As real incomes increase, does this not give an extra slack to be diverted to mortgage repayments?

Does anyone know about income/mortgage ratio's (traditional) in other simmilar developed countries? Forgive me if these questions have already been answered by others, im still relatively new (and just learning about equilibrium points)!

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It's generally accepted that 2 bed 2 bath flats are hugely over supplied in many areas. However houses are not - they haven't been selling because of uncertainty in the public mind as to what prices will do.

I think the following scenario is entirely plausible for houses:

1) VI hype the market all through winter on the back of the "buoyant" autumn

2) Spring bounce predicted and announced as fact in Feb

3) Rates get cut or don't increase

4) Public confidence in house prices increase

5) Sales improve enough to keep chains proceedable.

6) Public confidence reinforced.

I think that's enough to carry the house market all the way through 2006 and probably through to late summer 2007 before the debt overload really kicks in.

Price corrections in houses will only really become noticeable to the public in late 2008 or even 2009.

New build 2 bed flats in contrast will crash next year, and probably take existing flats with them. Good flats in good locations will sell and will provide enough upward movement to support the house market.

Agree about the 2 bed flats but there are a lot of 3/4 bed rabbit hutch houses as well which look vulnerable. £350k for a 4 bed house on a Persimmon estate in Dewsbury when the average income is <20k looks very dodgy. A fall to £300k is a 14%+ fall. Won't be long after the 2 bed flats. And will be very public.

Also premium properties had a lot of froth. If you accepted an offer for 500k for a house that you had bought for 350k in 2002 but which peaked at an overoptimistic EAs valuation of £600k that's still a 16.67% fall but you can still walk away with £150k gross gain into a weak market. A lot of these houses as we have seen elsewhere are taking considerably longer to sell possibly a year - if you have a large house and large mortgage that's a long time to keep paying say £25k in interest and maintenance etc pa with no guarantee the market isn't going to get a lot weaker. They will take the offer - why wouldn't they?

Think there will be resilient areas but think it will be the other way round- everything will fall except for a few select areas and types. Selective HPI/HPC is not the way an emotion-driven market works.

The Fox

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Its an interesting idea and as there is going to be such a glut of flats the prices will have to fall.

This not lending btl on new properties will only have an effect for a few months though before they all tick over into being 12 months or older.

Unless there's a massive increase in innner city rental demand why BTL flats?

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Agree about the 2 bed flats but there are a lot of 3/4 bed rabbit hutch houses as well which look vulnerable. £350k for a 4 bed house on a Persimmon estate in Dewsbury when the average income is <20k looks very dodgy. A fall to £300k is a 14%+ fall. Won't be long after the 2 bed flats. And will be very public.

Also premium properties had a lot of froth. If you accepted an offer for 500k for a house that you had bought for 350k in 2002 but which peaked at an overoptimistic EAs valuation of £600k that's still a 16.67% fall but you can still walk away with £150k gross gain into a weak market. A lot of these houses as we have seen elsewhere are taking considerably longer to sell possibly a year - if you have a large house and large mortgage that's a long time to keep paying say £25k in interest and maintenance etc pa with no guarantee the market isn't going to get a lot weaker. They will take the offer - why wouldn't they?

Think there will be resilient areas but think it will be the other way round- everything will fall except for a few select areas and types. Selective HPI/HPC is not the way an emotion-driven market works.

The Fox

Good points. On reflection the flats and houses distinction is fairly abitrary.

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It's the people living in the exisiting flats who see their price fall that I think about. They are part of the chain in moving up, so if they have less money to spend, these houses will sit on the market longer. I would say mid range houses will be reduced aswell.

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It's generally accepted that 2 bed 2 bath flats are hugely over supplied in many areas. However houses are not - they haven't been selling because of uncertainty in the public mind as to what prices will do.

I think the following scenario is entirely plausible for houses:

1) VI hype the market all through winter on the back of the "buoyant" autumn

2) Spring bounce predicted and announced as fact in Feb

3) Rates get cut or don't increase

4) Public confidence in house prices increase

5) Sales improve enough to keep chains proceedable.

6) Public confidence reinforced.

I think that's enough to carry the house market all the way through 2006 and probably through to late summer 2007 before the debt overload really kicks in.

Price corrections in houses will only really become noticeable to the public in late 2008 or even 2009.

New build 2 bed flats in contrast will crash next year, and probably take existing flats with them. Good flats in good locations will sell and will provide enough upward movement to support the house market.

Not sure the chains are "proceedable" as it is. Also unless everyone in the chain has a grasp of what is at stake (and there's always someone's mate's brother who will say "you can get at least 10k more/less than that - you should gazump/gazunder them!) and the longer the market goes without a major general correction the more confused the picture becomes. Chains will become proceedable when the "top" house in the chain drops his price and everyone else follows suit. And so it begins.....

The Fox

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Its an interesting idea and as there is going to be such a glut of flats the prices will have to fall.

This not lending btl on new properties will only have an effect for a few months though before they all tick over into being 12 months or older.

Unless there's a massive increase in innner city rental demand why BTL flats?

Suddenly realised why mortgage lenders might be refusing to give BTL mortgages on new build flats: to stop new ones being built. Anyone with plans to build more new build flats will find it harder to get off plan buyers, BTLs can't get the mortgage, FTBs can't / won't get the mortgage. New build blocks of flats like the ons still planned in my area should be stopped in their tracks. Don't know why I didn't think of it before.

Perhaps some people are already thinking about the glut of flats.

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New build flats will crash, when exactly it hard to say but probably 5- 10 months which will bring down all other flat prices. Why? Well if you can buy a new 2 bedder for 150K or a victorian coversion for 250K what are you going to do, so eventially older flats will follow.

When that happens is your £750K house in London which is essentially 3 flats at approx £250K each will fall when people are able to buy all 3 flats for £450K and spend a bit turning it back into a house.

Thats my theory and im sticking to it. :D

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It's generally accepted that 2 bed 2 bath flats are hugely over supplied in many areas. However houses are not - they haven't been selling because of uncertainty in the public mind as to what prices will do.

I think the following scenario is entirely plausible for houses:

1) VI hype the market all through winter on the back of the "buoyant" autumn

2) Spring bounce predicted and announced as fact in Feb

3) Rates get cut or don't increase

4) Public confidence in house prices increase

5) Sales improve enough to keep chains proceedable.

6) Public confidence reinforced.

I think that's enough to carry the house market all the way through 2006 and probably through to late summer 2007 before the debt overload really kicks in.

Price corrections in houses will only really become noticeable to the public in late 2008 or even 2009.

New build 2 bed flats in contrast will crash next year, and probably take existing flats with them. Good flats in good locations will sell and will provide enough upward movement to support the house market.

I think feb would be a bit premature (technically its still winter !) april/may before any proper figures show up.

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I think feb would be a bit premature (technically its still winter !) april/may before any proper figures show up.

That's my point VI will publish anything however early to keep momentum. "Spring Bounce" now seems to refer to any New Year activity.

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Alternative scenario:

1) With SIPPs gone there is nothing left to hold up 2 bed new build flat prices - they fall 30%+ rapidly to a level that FTBs can actually afford.

2) All other flats fall in value by a similar amount leaving many owners who were hoping to move upmarket stuck with no or negative equity.

3) 3 bed semis fall slightly in value as vendors compete for buyers.

4) Even the VIs can't hide what is going on as the Nationwide and Halifax figures go negative.

5) Public confidence in house prices fails.

6) The crash effect ripples all the way up the market to the most expensive houses as remaining buyers use houseprices.co.uk to ensure that they are paying less and less.

7) Even an IR cut doesn't help but when increased factory input costs filter through to output costs, CPI takes off and IR goes up staying ahead of US rates.

8) BTL owners in dire financial difficulty. Some bankrupt leaving lenders to sell off their portfolios and their homes.

9) Economic recession follows. Labour government falls.

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  • 302 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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