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What do you rate the chances of a House Price Crash?


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Still seeing some pretty horrific prices with all the nastiness that goes with it. Lots of chopped up houses being flogged as 1 bed maisonettes for 100,000s of pounds and in excess of the price of the original house!! 

Our best bet is that we aren't imagining this and this govt. really is committed to a major HPC. We've always said watch what they do and not what they say. BTL hammered, lettings agents hammered, top end of market hammered with a direct loss of around 9bn to the treasury according to some estimates, lots of pleaing and whaling from the VIs and diddly squat for the b'stards in the much anticipated Autumn Statement. Let's hope they continue on this trajectory.. 

 

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1 hour ago, AvoidDebt said:

Let's hope they continue on this trajectory.. 

Let's hope so. I am seeing a lot of 'empty homes' coming on the market around Cambridgeshire lately. Most of them are pretty awful inside. Looks to me like plenty of BTL'ers realise the game is up. With a bit of luck, the whole thing will tank before our eyes. 

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1 hour ago, Grumpysod said:

1. It needs far more affordable quality homes for the people who are supposed to be in one off the biggest and most successful economies on the planet.

IMO this is tricky as I really think it should stop supporting council states, "affordable housing" and social rents of any kind.

I think it is a vicious circle where by continually building new council states and supporting social tenants, this people don't really have a real urgency for progress in life and to get out of benefits.

There are few other countries where social housing is so extended as in the UK. It's a symptom of the real problem.

And if we continue supporting it, these developments shouldn't be in prime zone areas at all.

Probably controversial opinion, I know.

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21 minutes ago, Beborn said:

I think it is a vicious circle where by continually building new council states and supporting social tenants, this people don't really have a real urgency for progress in life and to get out of benefits.

Presumably estates. Amusing Freudian slip perhaps?

housing-completions-by-tenure-in-england

We've just tried your supposedly "controversial" plan for twenty-five years, and it's not going very well, is it? Are you arguing that we need to stick with it for another twenty-five years?

 

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2 hours ago, Beborn said:

I think it is a vicious circle where by continually building new council states and supporting social tenants, this people don't really have a real urgency for progress in life and to get out of benefits.

Yeah. Here's one. Council slouch!

http://metro.co.uk/2016/05/07/sadiq-khan-2016-everything-you-need-to-know-about-the-new-mayor-of-london-5867489/

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1 hour ago, Patient London FTB said:

Khan's attitude to terrorism seems quite lazy and ignorant, although of course the bit in white he didn't say.

Lazy.jpg

Edited by iamnumerate
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50 minutes ago, iamnumerate said:

Khan's attitude to terrorism seems quite lazy and ignorant, although of course the bit in white he didn't say.

Lazy.jpg

Replace "muslims" with "people who value their opinion more that human life" and you're onto something. While muslims are the most enthusiastic of the bunch today, the list is not short of christians, and the IRA should be a quick reminder that religion doesn't have a monopoly on terrorism. Although to be fair, it could be argued that anyone who is religious lacks critical thinking and reasoning skills.

When you group innocent people together with the bad ones you just create more resentment and hate across groups and risk pushing a few over the edge. It may be easy to do this, but it will not help your cause (unless you profit from war).

Can we get back to the subject of house price crash?

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4 hours ago, Bland Unsight said:

Presumably estates. Amusing Freudian slip perhaps?

housing-completions-by-tenure-in-england

We've just tried your supposedly "controversial" plan for twenty-five years, and it's not going very well, is it? Are you arguing that we need to stick with it for another twenty-five years?

 

So in the 30s and 60s they were building at twice the current rate? I get the 40s, but what happened in the past 30 years? Was this caused by Right to Buy?

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14 minutes ago, crashbaby said:

So in the 30s and 60s they were building at twice the current rate? I get the 40s, but what happened in the past 30 years? Was this caused by Right to Buy?

I'm with Daniel Bentley at Civitas on this one (the following is the introductory summary to his report The Housing Question: Overcoming the shortage of homes)

Quote

Housebuilding has been failing to keep pace with population growth and household formation for many years. Various reviews have been conducted and numerous initiatives proposed by successive governments in an attempt to increase supply. Despite a modest increase in output over the past few years, however, it remains well below what is felt to be required; the shortfall for England currently stands at more than 100,000 per annum.


The argument advanced in this paper is that poor levels of housebuilding are the result of an over-reliance on private-sector output; that private housebuilders have never been able to deliver all of the country’s housing needs; that housing shortages have only ever been overcome when private output has been supplemented by substantial public-sector agency and investment; and that there is scant prospect of the current housing shortage being overcome without a similar approach. The paper proposes placing a new statutory obligation on local authorities to acquire sufficient land to top up private-sector housebuilding to the required levels, funded by central government borrowing; new homes could be sold mostly into owner-occupation and the proceeds of sales reinvested into more housebuilding, in perpetuity. It also proposes a new contract between planning authorities and developers in which permission to build residential property is time-limited and granted on a use-it-or-lose-it basis; failure to build out sites within agreed timescales would result in the forfeiture of the land at half its residential use value

I think that problems with the shortage of housing have been made to carry the can for the consequences of the financialisation of housing (which was much more about credit that it was about any shortage). However, I don't feel it's an either or. There are problems with the mortgage lenders but there are also problems with the rate at which we build houses, especially when we ignore the total level of the stock and focus on where houses are needed most. Bentley tweeted something the other day about making housing plentiful and cheap. That's what I want to see. I can see a role for some building (certainly around London) in order to make what presently sounds like a delusional pipe dream into a reality.

I think you could get a pretty marked house price crash and still have housing costs bearing down pretty hard on people's standards of living. We're going to have enough trouble paying our way in the world. I can't see why we are so determined to handicap ourselves with sky-high housing costs and banks teetering on the edge of insolvency because they bet the ranch on high house prices. Sometimes boring is best. This ludicrous boom-bust cycle is a curse.

Edited by Bland Unsight
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Re Japan and 25 year slow motion reversion.

Background to this - 30 year trend down in interest rates allowing banks to be bailed out and borrowers to engage in the market at ever higher leverage ratios to keep the remnants of the bubble going.

A one-off situation that cannot be repeated from here. 

Only so far the central banks can manipulate rates, a bit like the butterfly effect if they go to far and trigger the population to spend in expectation of high/hyperinflation they have lost control and will not regain it. 

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Looks like the country stopped building council houses not long after Maggie came to power, Blair being himself, didn't correct this because people felt richer.

The autumn statement was hopeless, drippy Phil couldn't pull the skin of a rice pudding.

I just get the feeling they have no idea of what the problem is. I mean productivity gap, err, energy costs a lot, transport costs a lot, housing costs a lot, tax burden is high, not to mention the sheer amount of red tape involved in doing anything in this country.

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I can't think of a healthier economic or social development for the United Kingdom than a HPC.

But I can see why HPCs have to work on their credibility, and why potential investors in Real Estate simply don't believe it will ever happen.

 Its a little like the Titanic not having enough lifeboats. There had been so few major shipwrecks in the two generations before she hit the ice, and adding the wonders of radio communications, all made passengers feel dreamily safe.

And other Bloomberg articles in recent days don't accord with the NAMA one cited above.

http://www.bloomberg.com/news/articles/2016-11-25/london-home-values-surpass-14-times-earnings-for-first-time

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46 minutes ago, Society of fools said:

I can't think of a healthier economic or social development for the United Kingdom than a HPC.

But I can see why HPCs have to work on their credibility, and why potential investors in Real Estate simply don't believe it will ever happen.

 Its a little like the Titanic not having enough lifeboats. There had been so few major shipwrecks in the two generations before she hit the ice, and adding the wonders of radio communications, all made passengers feel dreamily safe.

And other Bloomberg articles in recent days don't accord with the NAMA one cited above.

http://www.bloomberg.com/news/articles/2016-11-25/london-home-values-surpass-14-times-earnings-for-first-time

Yes; a London owner of 35 years was dead chuffed about this the other day.  x15 in his area.  35 years an owner.  <40 "don't know how to save" and "prefer to spend their money on hedonistic stuff".

Well many BTLers aren't laughing as much, after S24 announced.  Many in a pincer.  Tax, or if need/want to sell, then find the CGT.   Except all those 5+ properties, mewed for deposits to repeat.... can they find the CGT.   They can work on their bankruptcy.  

Permanently high plateau thinkers are nothing new.

Senior politician seems happy at the thought of bubble-heads taking losses on their gold bricks (and firm enough to tell 11 property BTLer they have been blocking FTBs/homeownership).

Quote

 

November 13

..waded in about foreign investors, Chinese, Russians etc buying up London property.

His view? Well they all need a lesson. We are cracking down on money laundering but what we need is a big crash in house prices in London to teach these investors that they will not always make money because they think they can’t lose. Pick the bones out of that one.

http://www.housepricecrash.co.uk/forum/index.php?/topic/205642-btl-scum-regrouping-and-on-the-offensive-merged/&do=findComment&comment=1103138451

 

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53 minutes ago, Venger said:

  Permanently high plateau thinkers are nothing new.

But rarely have permanently high plateau thinkers had so much institutional heft behind them, with, ( not being melodramatic here), every sinew of the British financial/political/economic establishment helping keep such a massive bubble inflated.

I can think of a dozen factors keeping the House Price Bubble inflated without even breaking a sweat.

Here goes:

(1) the fact that vast numbers of MPs have property portfolios, secured by massive mortgage debt

(2) the fact that vast numbers of financial journalists have property portfolios, secured by massive mortgage debt

(3) the fact that British interest rates have been deliberately brought to their lowest point in 350 + years

(4) the fact that the country has had and continues to have a massive splurge of Quantitative Easing

(5) the fact that Britain's Chief Central Banker Mark Carney has never raised an interest rate in his professional life, neither in Canada nor in Britain

(6) the fact that whenever consumer inflation is high, the Bank of England has an iron-clad rule to "look through" the period of high inflation, rather than raising interest rates as most economic theory suggests that they should do.

(7) the fact that the United Kingdom enjoys some of the easiest rules and regulations for foreign real estate ownerships in the world

(8) the fact that the United Kingdom has notoriously lax money laundering regulations for RE investment out of China, Russia, Africa, Latin America and soon to be Iran

(9) the fact that purchases of RE have had taxpayer guaranteed funding extended to them in the form of Help to Buy ( which should be called Help to Sell)

(10) the fact that immigration has been allowed to let rip uncontrollably with little say from the voter

(11) the fact that there is God knows how many British media outlets on TV and radio- from Kirstie Allsop on down- churning out utterly one-sided propaganda about how "You can't lose investing in property"

(12) the fact that other forms of long-term investment like pensions, have been deliberately hamstrung by government policy

And that's in about 3 minutes of thinking. I'll bet there's a dozen more factors.

This is a deliberate racket. It takes major effort to continue a racket, and most of them simply collapse under the weight of the lies needed to sustain them.

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Some MPs.  Not all.  I can think of one high profile Labour one who was infatuated by property.

Many financial journos at BTLelegraph very unhappy about shock S24 and other measures.  Shock and awe.  Not been able to push back HM Treasury though.  One journo bought with his pal last year.  He made his decision, in 'the forever HPI".  No one forced him to buy.

 

Quote

 

Days before Buget he mocked any chance of any move against BTLers.... wow.

Meanwhile one older journo who was previously very happy with HPI++++ takes a wider overview, with his own sons in mind.  For so many years he used to mention our forum quite a lot, with quite a smug attitude (imo) to his HPI mad-gainz.  Seems to have changed.... although plenty of others who are in love with their mad-gainz and don't see them at risk (forever HPI).

Big Sunday Times article sometime in 2015.  Something like "Why I wouldn't care if house prices fell 50%, and then fell another 50% the following day".

uFaPW14p.png

 

Banks have had to offload risk onto the bubble embracers imo.   £Trillions in owner outright, and £100s Billions in BTL, with quite a few over-extended from greed.

I've not got time to cover all your points.  Hopefully others will try and counter them.   House prices run on money, not immigration (without money) / population growth.  Immigration without money is a net drag/cost, and is more of a risk to house prices (imo).

HousePriceBubble; "The story of how the financial system failed and how it embedded a ludicrous faith in property in the boomers."    (Source: Bland Unsight)

Edited by Venger
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My thoughts below

I think we are now into what will be a long drawn out waiting game.  

1) Prospective FTBs or second / third movers cannot afford to buy or move - the market has well and truly left them behind.  Market is shrinking - WTF can afford to buy?

2) Mortgage rates cannot really go any lower (the opposite is more likely) so that avenue to pump the market and nos of new entrants is closed now.  Post Brexit inflation risks push interest rises into view over next 12-24 months

3)  BTL - that kept the market afloat in many areas is in terminal decline (not sure if it will be cliff edged or gradual).  Recent Govt intervention (tax changes etc) signaled that BTL is fair game.  Prospect of political intervention will keep increasing numbers of foreign buyers away.

4)  BOMAD will be getting increasingly concerned about lending as they increasingly realise the game has massive risks and more and more are approaching retirement where they will need access to their cash.  

5) Brexit will help stall the market further as confidence dips and the all important sentiment turns against housing being a one way bet.

All reasons point to a major correction (But - we have been saying this for years)

However  - How long will it take for any of these factors together to actually cause prices to decline in any meaningful way?  I can't see repossessions increasing dramatically without either major interest rate rises which there will not be or mass unemployment which isnt likely in the short / medium term. So - what happens? Either it is going to be a slow balloon deflation whereby prices will gradually come down as  the usual trio of divorces, deaths and job moves trigger sales at lower prices. OR - there is a steeper decline if BTLs really scramble to jump ahead of the train wreck coming up behind and there is a fight for the exit.  I know what I want to believe but what will play out is anyone's guess.  Of course the VIs will try every game under the sun to stop a correction .   

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One thing is not clear to me.

Excluding already empty BTL properties, if there is a big increase on BTL available for sell, that means potentially a lot of rentals removed from the market, i.e. a decrease on supply and therefore because the tenants previously on those properties may not be in a position to purchase, an increase on (rental) demand.

Basically, by removing BTL from the market, those tenants need to live in some other place, and will add pressure and could increase the rents or competition on other rentals/BTL.

Of course whoever is buying those BTL may be leaving another rental behind so supply-demand is balanced in the long term, but in the short term an imbalance is quite possible.

Am I missing something?

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5 minutes ago, Beborn said:

One thing is not clear to me.

Excluding already empty BTL properties, if there is a big increase on BTL available for sell, that means potentially a lot of rentals removed from the market, i.e. a decrease on supply and therefore because the tenants previously on those properties may not be in a position to purchase, an increase on (rental) demand.

Basically, by removing BTL from the market, those tenants need to live in some other place, and will add pressure and could increase the rents or competition on other rentals/BTL.

Of course whoever is buying those BTL may be leaving another rental behind so supply-demand is balanced in the long term, but in the short term an imbalance is quite possible.

Am I missing something?

Yes you're missing that for a huge number of landlords, even a single month void represents a significant cashflow headache, they aren't going to be leaving flats/houses empty for any protracted length of time. Just not going to happen.

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6 minutes ago, Beborn said:

One thing is not clear to me.

Excluding already empty BTL properties, if there is a big increase on BTL available for sell, that means potentially a lot of rentals removed from the market, i.e. a decrease on supply and therefore because the tenants previously on those properties may not be in a position to purchase, an increase on (rental) demand.

Basically, by removing BTL from the market, those tenants need to live in some other place, and will add pressure and could increase the rents or competition on other rentals/BTL.

Of course whoever is buying those BTL may be leaving another rental behind so supply-demand is balanced in the long term, but in the short term an imbalance is quite possible.

Am I missing something?

I see what you're saying. It's probably dependent on how many BTLs come to market. If it starts as a trickle and slowly increases then things would balance out. If there's a massive flood, then yes there may be a spike in rental demand. However the resultant reduction in prices would then tempt more into buying. It really depends on how many tenants would be in a position to buy.  I'd imagine this is quite a difficult thing to model. However, as you probably realise, a lot of HPC is about the long game, rather than short term effects. 

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20 minutes ago, Beborn said:

One thing is not clear to me.

Excluding already empty BTL properties, if there is a big increase on BTL available for sell, that means potentially a lot of rentals removed from the market, i.e. a decrease on supply and therefore because the tenants previously on those properties may not be in a position to purchase, an increase on (rental) demand.

Basically, by removing BTL from the market, those tenants need to live in some other place, and will add pressure and could increase the rents or competition on other rentals/BTL.

Of course whoever is buying those BTL may be leaving another rental behind so supply-demand is balanced in the long term, but in the short term an imbalance is quite possible.

Am I missing something?

Was not BTL engineered to replace social housing that was sold off the most part and no longer added to, private social housing BTL.....security to little security for customers that use it?.....am I missing something?

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2 hours ago, Beborn said:

One thing is not clear to me.

Excluding already empty BTL properties, if there is a big increase on BTL available for sell, that means potentially a lot of rentals removed from the market, i.e. a decrease on supply and therefore because the tenants previously on those properties may not be in a position to purchase, an increase on (rental) demand.

Basically, by removing BTL from the market, those tenants need to live in some other place, and will add pressure and could increase the rents or competition on other rentals/BTL.

Of course whoever is buying those BTL may be leaving another rental behind so supply-demand is balanced in the long term, but in the short term an imbalance is quite possible.

Am I missing something?

The people who are most able to pay crazy rents are those in most cases able to buy.

The difficult period will be the adjustment phase between asking prices and the final selling price to people who will live in them.... or indeed BTL landlords who do not have the leverage or can do business at a higher yield due to falling prices.

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16 minutes ago, Fromage Frais said:

The people who are most able to pay crazy rents are those in most cases able to buy.

The difficult period will be the adjustment phase between asking prices and the final selling price to people who will live in them.... or indeed BTL landlords who do not have the leverage or can do business at a higher yield due to falling prices.

@Neverwhere also posted a theory that when those best able to buy into the initial stage (of correction) go on to buy - it may put a test on what landlords can try and seek from the market in £rent, from those who are not able to pay the crazy rents.

Prices can fall sharply as well.  Not sure we need that many BTLers coming to market, or long-wave boomer owners either, in a market shift.  Housing market runs on money.  Hard to claim your BTL is worth £400K peak, when a BTL a few doors up just accepted £300K for near identical house, and next month another BTLer accepts £275K for near identical house around the corner.  'Poof!'

Quote

 

“Demand is intrinsically linked to affordability, and that’s linked to how much banks are prepared to lend and how much people are prepared to borrow.

Demand for housing is a very flexible thing. Saying something isn’t going to happen because it hasn’t happened yet doesn’t really make any sense.  That’s like saying because I haven’t died yet I won’t, but I guess I probably will. And a housing crash is much the same. Something not happening simply makes it more likely that it will, rather than it won’t, if the conditions are in place, and the conditions are in place.

Markets are driven at the margin. They’re driven by people who have to buy or people who have to sell. So when you get to the point when there are people who must sell, and that will come, then prices fall across the board because not many people have to be forced to sell at a low price to push values down.

 

 

Quote

Conversely, for prices of assets to fall, it takes only one seller and one buyer who agree that the former value of an asset was too high. If no other bids are competing with that buyer’s, then the value of the asset falls, and it falls for everyone who owns it. If a million other people own it, then their net worth goes down even though they did nothing. Two investors made it happen by transacting, and the rest of the investors made it happen by choosing not to disagree with their price.
 
Financial values can disappear through a decrease in prices for any type of investment asset, including bonds, stocks and land.

[..]Only a very few owners of a collapsing financial asset trade it for money at 90 percent of peak value. Some others may get out at 80 percent, 50 percent or 30 percent of peak value. In each case, sellers are simply transforming the remaining future value losses to someone else. In a bear market, the vast, vast majority does nothing and gets stuck holding assets with low or non-existent valuations.

-Pretcher

 

Edited by Venger
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for prices of assets to fall, it takes only one seller and one buyer who agree that the former value of an asset was too high. If no other bids are competing with that buyer’s, then the value of the asset falls, and it falls for everyone who owns it. If a million other people own it, then their net worth goes down even though they did nothing. Two investors made it happen by transacting, and the rest of the investors made it happen by choosing not to disagree with their price.

I can understand that form of reasoning, it makes perfect sense.

But I can also see the converse happening.

Let me give you a real life example. My sister in law was recently selling her five bedroom house in Western Sydney. She listed it at what I considered an insane price of $1.25 million AUD, which was about $350,000 AUD more than what she had bought it for 5 years before. After 4 months on the market, she had not had an offer exceeding $1,050,000 AUD, and was considering taking it off the market for a while.

Then along comes a guy who must be the living embodiment of PT Barnum's dictum that there is a sucker bought every minute. He was in his late forties, and had two children in their late teens/early twenties, and two parents in their early seventies. This guy said that all three generations of the same family were going to live in my sister in law's house.

And he paid the $1.25 million AUD, for which mortgage all three generations pitched in.

So there we have it, a buyer and a seller agreed that a certain property was worth "X" price. And of course all the other five bedroom properties in that part of Sydney, which should realistically have been valued at just over $1,050,000 AUD, then become worth $1.25 million AUD, based on the hard evidence of the concluded deal.

There's a hell of a lot of "greater fools" out there........

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