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If A Crash Happens, What If The Lowest Low Still Represents Unaffordable Housing?

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Title says it all.

We have a house price crash.

Yay!

And then the crash bottoms out at something like 20% or 30%.....and.....oh sh1t, housing is still unaffordable, and prices are on the way back up.

Would there be pricing support levels on the housing market that simply won't get breached?

What would you do in that case? After all, it would seem that the "imminent" HPC that would make housing affordable has just proven to you that housing will NEVER be affordable and that housing = getting up to your hairline in debt.

Emigrate?

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2016 Minimum wage @ 40 hours, full time= £15000

£15,000 x2 with a couple x3.5 lending = £105,000

2020 Minumum wage @ 40 hours, full time= £18720

£18720 x2 with a couple x3.5 lending = £131,000

Even if we get a HPC I wonder if the living wage will set a floor on prices...?

Minimum wage is roughly now double compared to when it was introduced which was just before the BTL boom.

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Housing is an illiquid asset. Not like stocks etc. The best time to buy is when you are the only buyer and money is hard to come by.

As you can see we have neither of those in place or are likely to have as we have mass immigration population growth and ZIrp. If we exit the EU there is a chance to change the two factors. If we don't then we must wait till the break up of the EU or some other 'crash event' to return IRP to something where money and debt have a risk involved, ie it costs you say 5% to borrow.

I still blame zirp mainly for HPI to infinity.

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Have been pondering this one myself.

My take would be that there will be a 20% to 40% crash as the prices have been propped by BTL which appears to be coming to an end at the high-price low-yield model in London, but I don't think prices will drop more than 40%.

So property in London will remain relatively affordable, as your basic 2 bedroom flat will then be (20%) £400,000 or (40%) £300,000 which is better than current prices but still difficult for the average salary. (particularly if the crash then tightens up mortgage lender, but as discussed that would probably also be a good thing to prevent the silly season levels of debt out there)

However I think after this type of crash/correction, the demographic problems (too many property owners passing on, or selling up to pay for healthcare) will do a slow long grind on property prices - and so the 'normal' HPI will come to a stop, and prices will settle down to a normal inflation/RPI growth. Still unaffordable-ish, but no longer the runaway train they have been and likely of little interest to investors.

Not sure if that is my prediction, or what I want to happen (particularly the drop-off of investors to stop the finalisation of housing)

Cannot see a bigger crash as the UK has too much of an underlying obsession with property which will underpin the market if it drops.

And so, I think certain people will be minded to get out of dodge and leave the UK - but will always be a minority who are ready to get on their bike/plane and jump ship; so think most will muddle on and make the best of it.

However I have a feeling that if you want to really get ahead, then moving globally would the right way to go - as if the market is rigged (which is clearly is for UK Property and Debt IMHO), then don't bother to play the game..

That's from my misty crystal ball anyways.

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Even when a total collapse comes, the housing stock in the UK is ****.

There are few decent houses, few decent areas to live and endless new build red brick estates full or shoe box houses/flats.

Leave, find a better life elsewhere.

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Sadly i think thats what may happen in southern England and decent parts of the country, i'll be just about OK if prices drop to pre HTB levels but most under 45s who are priced out won't.

Where do you emigrate to, everywhere decent on the planet has the same property bubble. Moving to cheaper parts of Britain would be easier.

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Don't over think it, it comes down to very basic maths.

Who can borrow the most and how much can they borrow.

I believe that if the majority of first time buyers cannot afford to buy, the rules will be changed until they determine the market level.

However this relies on policy changes.

But society cannot remain stable without affordable housing and food.

A 2 bed home around my way costs 200k so 40% should just about do it.

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This thread does raise a good question....what should the average house price been based on current average wage

So outside london, for a couple we are talking about 200K, for a single person, 130K, so somewhere in between, 150K maybe.

Prices have a long way to fall, unless of course single average earners are not meant to be living in the UK

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To sort out the economy properly prices need to fall to a level where

* people who want to buy do not rely on any form of state help (not just help to buy schemes but working tax/child tax credits etc once they have bought)

* people can afford a home AND save for rainy days/retirement

* people can afford a home and spend some money into our excessive consumption based economy - if a consumption based economy is a desirable thing, which is a whole other argument

* people can afford to have children. And I mean this in a time as well as money sense. It is no good having a child, and requiring two parents to work full time - and modern 'full time' is 9-5 plus 3 hours of commute and extra presenteeism to put a roof over there head.

With all those factors in mind, I think prices are so out of whack - at least in the South East - that my gut says we now need 70% off. And quite honestly, that would still only be my interpretation of fair value. A crash that takes thme past that, as proper crashes do would take 80-90% off. I would love that because I think we'd finally kill the deeply toxic house price inflation religion. At least for a few generations.

If they do drop 20-30% (which isnt a crash now, its just slightly less insane)a) and stay there, then wage inflation still has a long way to go to cancel out the long term effects that these prices are going to have for any new entrants who want a life beyond paying for bricks.

Edited by Frugal Git

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£18720 x2 with a couple x3.5 lending = £131,000

Add in a 10% deposit and we're not far off the nominal lows of 2009.

Today's young 'uns have some serious uni debt to contend with and that will ultimately impact their ability to borrow stupid amounts.

Edited by rantnrave

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Title says it all.

We have a house price crash.

Yay!

And then the crash bottoms out at something like 20% or 30%.....and.....oh sh1t, housing is still unaffordable, and prices are on the way back up.

Would there be pricing support levels on the housing market that simply won't get breached?

If people cant afford it then what exactly is providing this "support" ?.

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Sadly i think thats what may happen in southern England and decent parts of the country, i'll be just about OK if prices drop to pre HTB levels but most under 45s who are priced out won't.

Where do you emigrate to, everywhere decent on the planet has the same property bubble. Moving to cheaper parts of Britain would be easier.

Indeed where do you emigrate to on a rather ugly planet with the UK well up there in top 1% if you include the social benefits, most especially the NHS and the fact it is a relatively beautiful green and pleasant place with a temperate climate. The States certainly come at a price when you factor in medical insurance and Europe only has a few nice pockets such as rural France. Why do you think the whole world is looking at the UK with envious eyes and drawing up its plans to invade us be it landing craft on the Kent shores or expired student visa issued to Africans, basically to hitch a free ride on 300 years of graft by ourselves and our fore fathers.

Still a landing craft or two on the Kent shores will scare the UK indigenous population shitless and then may be will get a Brexit and stop concreting over our green and pleasnt land to accommodate the extra millions and have a house price crash to boot.

Edited by crashmonitor

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Add in a 10% deposit and we're not far off the nominal lows of 2009.

Today's young 'uns have some serious uni debt to contend with and that will ultimately impact their ability to borrow stupid amounts.

The trouble with the lows of 2009...it was near impossible to find someone to sell a decent house at those lows.

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When I went to my mortgage broker in January, nationwide couldn't offer me enough for the house purchase.

I checked their calculator recently and it appears their criteria is less strict now. The borrowing estimate now works at about 4x salary...

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2016 Minimum wage @ 40 hours, full time= £15000

£15,000 x2 with a couple x3.5 lending = £105,000

2020 Minumum wage @ 40 hours, full time= £18720

£18720 x2 with a couple x3.5 lending = £131,000

Even if we get a HPC I wonder if the living wage will set a floor on prices...?

Minimum wage is roughly now double compared to when it was introduced which was just before the BTL boom.

It's more complicated than that though.

The higher minimum wage may increase automation (e.g. retail, more self-service) and so fewer jobs will be available.

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The trouble with the lows of 2009...it was near impossible to find someone to sell a decent house at those lows.

Since 2009 i've grafted my socks off and saved not much more than HPI on a 3 bed house in my search area.

What a mug i am.

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It's more complicated than that though.

The higher minimum wage may increase automation (e.g. retail, more self-service) and so fewer jobs will be available.

It also ignores student loans which have a real impact on take home pay for the 50% impacted

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Since 2009 i've grafted my socks off and saved not much more than HPI on a 3 bed house in my search area.

What a mug i am.

It's a bit location dependent, from about Derbyshire north it has tracked CPI at best from the supposed trough, in Scotland prices have continued to collapse in real terms. On the Halifax calculator...Scotland has increased 6% from Q1 2009 (less than 1% compound down to Yorkhire 13% (2% compound).

The problem has been most acute through the Home Counties corridor to Cambridge and Northants where immigration has been rife.

Edited by crashmonitor

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It also ignores student loans which have a real impact on take home pay for the 50% impacted

50% wont have this amount of debt.

But whatever amount it is i just can't see how an economy can be run when a significant amount of the better educated adults of Britain have so much debt. Its an experiment that is bound to fail.

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If people cant afford it then what exactly is providing this "support" ?.

Government gimmicks - Help to (insert word), NIRP, whatever. I mean that TPTB will not accept prices falling below a certain level. Look how they slashed 4% off the base rate in March 2009.

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The trouble with the lows of 2009...it was near impossible to find someone to sell a decent house at those lows.

Totally agree.

The market fell on low volume - but seeing values fall on charts is no good when few on market willing to accept lower prices / come to market to sell.

Even Daily Express only described it as a Slump.

"House Price Slump Is Over" in 2009.

Even the few who did get nudged into looking to sell - held off.

I know several friends/acquaintances who have put houses up for sale over the last few months in the £500-800k region, who are expecting to have to wait 12 months + to sell. In one case they had an offer £50k under asking (which was I think £50k less than the agents recommended price anyway) and they rejected it. Another who put it on at what seemed a peak price to me, only to drop it by about £80k a few weeks later after little response and who has now decided not to sell (doesn't need to).

It passed so many owners by (especially older long-wave HPI outright owners) - "well other people's houses might have fallen... not mine."

And then it was full-speed new HPI++++ last few years, in many areas.

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Totally agree.

The market fell on low volume - but seeing values fall on charts is no good when few on market willing to accept lower prices / come to market to sell.

Even Daily Express only described it as a Slump.

"House Price Slump Is Over" in 2009.

Even the few who did get nudged into looking to sell - held off.

It passed so many owners by (especially older long-wave HPI outright owners) - "well other people's houses might have fallen... not mine."

And then it was full-speed new HPI++++ last few years, in many areas.

That piece of filth Brown had an election to win, it didn't matter to him if he has to destroy the stability of a generation to get it.

Irony is he was replaced by someone even more obsessed with interfering in the market to rig elections.

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It's a bit location dependent, from about Derbyshire north it has tracked CPI at best from the supposed trough, in Scotland prices have continued to collapse in real terms. On the Halifax calculator...Scotland has increased 6% from Q1 2009 (less than 1% compound down to Yorkhire 13% (2% compound).

The problem has been most acute through the Home Counties corridor to Cambridge and Northants where immigration has been rife.

Its the same in the north east,im seeing house prices below 2003 levels in many places nominal,inflation adjusted they are down a lot.

There are thousands of southern based BTLers who have been skinned alive buying terraces in old northern industrial towns.I have many friends who took their hands off selling terrible little houses for £70-80k between 2003 and 2007 and buying decent ex council semis for the same price,or putting £20k extra and getting much better houses.

Those house are now starting to come back onto the market and selling for £30k prices,or around the price they were in around 1995.

The north takes southern money in tax for our benefits,and we take the southern BTLers house deposits as well and sell them a load of rubbish :lol:

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Its the same in the north east,im seeing house prices below 2003 levels in many places nominal,inflation adjusted they are down a lot.

There are thousands of southern based BTLers who have been skinned alive buying terraces in old northern industrial towns.I have many friends who took their hands off selling terrible little houses for £70-80k between 2003 and 2007 and buying decent ex council semis for the same price,or putting £20k extra and getting much better houses.

Those house are now starting to come back onto the market and selling for £30k prices,or around the price they were in around 1995.

The north takes southern money in tax for our benefits,and we take the southern BTLers house deposits as well and sell them a load of rubbish :lol:

Didn't you point this out as good value a while ago?

http://www.rightmove.co.uk/property-for-sale/property-42292166.html

I've no longer got PB installed, but recall asking price dropped a bit since you posted it up.

Sold for £275K http://www.rightmove.co.uk/house-prices/detailMatching.html?prop=42292166&sale=2021503&country=england

Not denying their are pockets where prices have slumped (and I have mulled over moving to one such area and going for an easier life - but far away from family and friends), but some hpcers make out we've had the crash, use 2007 as the marker for value, and hope for HPI++++++ ripples - when in my areas it's HPI++ massiv.

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