Which type of property & location will crash hardest

[mathschoc]

8 minutes ago, Venger said:

 

It doesn't take that many owners to have to sell at a lower price, and accept lower offers, to bring wider house prices down.

I personally need a HPC, but in my town many more owners are taking their home off the market than reducing significantly enough to cause a crash, I have looked at the stats on this for too long. I was convinced of a HPC in 2016, maybe it needs another trigger.

If it does not happen this year I will be emigrating.

[thisisthisitmaybe]

12 minutes ago, mathschoc said:

I personally need a HPC, but in my town many more owners are taking their home off the market than reducing significantly enough to cause a crash, I have looked at the stats on this for too long. I was convinced of a HPC in 2016, maybe it needs another trigger.

Another under-reported trend is the fact that the kids are moving home after uni. That means the parents aren't able to downshift, so are just staying put. 

The age-old trigger has been interest rate hikes, but I don't see that happening. Another global downturn might trigger a wave of repossessions. But these are all ifs. I'm looking to get a work transfer to Argentina.

[Arpeggio]

51 minutes ago, mathschoc said:

I personally need a HPC, but in my town many more owners are taking their home off the market than reducing significantly enough to cause a crash, I have looked at the stats on this for too long. I was convinced of a HPC in 2016, maybe it needs another trigger.

If it does not happen this year I will be emigrating.

They must think this is a bump in the market and that conditions will return in the future but the contributing factors to HPI are disappearing politically, demographically and economically. Where are you thinking of going? I like Germany myself having pondered it occasionally.

[dgul]

IMO we can't have an effective property crash in the UK at the moment. There is just too much liquid wealth on the sidelines, waiting for a 5%-off bargain.  It is completely ingrained now; I've had so many conversations with people who have said that there is only one way to invest, and that they've got money waiting for the right moment -- and they are all keen to extract money from pensions as soon as they've got an excuse.

I know this is contradictory -- they're committed to property as the only worthwhile investment class and they're waiting for prices to turn to give them a bargain -- but that is how they think.  And there are loads and loads of them.

You'd think that the way forward would be to have a crash, to break their confidence -- that should have occurred in 2004 and perhaps 2007... but IMO it is now too late, there is so much belief in property that they'd chase the market down with every fractional reduction, supporting prices, with new entrants coming in with additional support for every fractional reduction.  Okay, we might get 10% down, but that only takes prices back a couple of years -- I can't really see us getting back to 2004 prices (when we should have had the crash!), let alone back to 1995 or so.

I think that the only move that can (actually, must) occur now is for their wealth to disappear.  This is probably currency/inflation related, but might include things like loss of benefits/pension.  

Now, prices will go down, but IMO we've got about 15 years of slow grind, rather than a sharp shock, and it might be completely hidden by currency/inflation moves.

[Venger]

17 minutes ago, dgul said:

IMO we can't have an effective property crash in the UK at the moment. There is just too much liquid wealth on the sidelines, waiting for a 5%-off bargain.  It is completely ingrained now; I've had so many conversations with people who have said that there is only one way to invest, and that they've got money waiting for the right moment -- and they are all keen to extract money from pensions as soon as they've got an excuse.

I know this is contradictory -- they're committed to property as the only worthwhile investment class and they're waiting for prices to turn to give them a bargain -- but that is how they think.  And there are loads and loads of them.

It is that type of thinking that powers prices higher and higher in bubbles - which has happened in my area to extremes.

Always vast reserves of buyers all panting to buy, so can't crash... get in there!   Have you seen the homeownership figures according to one recent BBC News source?  Plunged.

My own view is things can change rapidly, and happen faster than you think.   Sentiment changes, with cascade effect, but I am not going to post more about S24, PRA etc here.  Seems like many HPCers also don't know first thing about it, just like many BTLers.

It only takes a sale at a lower price between a few owners and sellers, to bring down wider values.   If house currently has a market value in owners head of about £600K, then he is going to find reality prevail if near identical house next-door sells for £400K.... then a few others such transactions in his area.  Poof. 

Quote

'Well, these three have to go, anyway.' He tapped the surface of the map.  'That and the refinery raid should put some sand in their fuel-lines,' he said, clapping his hands together and rubbing them.
'But we believe the Imperial Army has great reserves of fuel,' Napoerea said, looking very unhappy.
'Even if they have,' he told the high-priest, 'Commanders will move more cautiously knowing supplies have been inter-rupted; they're careful guys - but I bet they never did have the supplies you thought; they probably think you have bigger supplies than you do, and with the advance they've had to fund recently... believe me; they may panic a little if the refinery raid comes off the way I hope it will.'

-Use of Weapons

 

Edited January 28, 2017 by Venger

[PopGun]

On 27/01/2017 at 11:02 AM, darwin said:

I am old enough to remember the crash in the 90s.  IT WAS SAVAGE.

In Kensington & Chelsea ex-council properties sold for £4k.

In Hull houses were bought and sold in the pub. A solicitor would be at a table and it was done right there. No searches, no surveys, no exchanges, no EAs, no bullsh!t; you wanna buy it or not?

What I'm saying is a real crash affects all areas and all properties. Properties can't sell because no-one's got the money.

That said, my personal wish is to see all these places with kitchens in the living room "open plan living" hit the wall at a million miles per hour.

Going even further back to the early 80s. When installing a central heating system cost more than the actual house...

[crashmonitor]

35 minutes ago, dgul said:

IMO we can't have an effective property crash in the UK at the moment. There is just too much liquid wealth on the sidelines, waiting for a 5%-off bargain.  It is completely ingrained now; I've had so many conversations with people who have said that there is only one way to invest, and that they've got money waiting for the right moment -- and they are all keen to extract money from pensions as soon as they've got an excuse.

I know this is contradictory -- they're committed to property as the only worthwhile investment class and they're waiting for prices to turn to give them a bargain -- but that is how they think.  And there are loads and loads of them.

You'd think that the way forward would be to have a crash, to break their confidence -- that should have occurred in 2004 and perhaps 2007... but IMO it is now too late, there is so much belief in property that they'd chase the market down with every fractional reduction, supporting prices, with new entrants coming in with additional support for every fractional reduction.  Okay, we might get 10% down, but that only takes prices back a couple of years -- I can't really see us getting back to 2004 prices (when we should have had the crash!), let alone back to 1995 or so.

I think that the only move that can (actually, must) occur now is for their wealth to disappear.  This is probably currency/inflation related, but might include things like loss of benefits/pension.  

Now, prices will go down, but IMO we've got about 15 years of slow grind, rather than a sharp shock, and it might be completely hidden by currency/inflation moves.

Agree with some of this. It's not just wealth on the sidelines, it's transferring that wealth from one property to another too. Virtually nobody buys a house anymore, it's either a transfer from another house, inherited wealth from housing or parental assistance. In theory if you just transfer this created wealth around the Market you can put any price on property you want, a closed shop to existing owners or those with wealthy parents. That's the bleak assessment, I still think prices have over extended themselves in the south now, however much recycled wealth is propping it up.

I think the current state of play in the UK is 11.5 trillion pounds of wealth of all types (half in the housing market) and 1.5 trillion pounds of debt.

[Sancho Panza]

2 hours ago, thisisthisitmaybe said:

Jim Mellon's latest Master Investor article discusses London house prices.

He thinks the longterm is down but there might be a deadcat bounce with the fall of sterling. He also thinks the gov might reverse the stamp duty changes.

I've in two minds on Mellon. On the one hand, he has made some very good calls in the past like predicting the financial crisis a couple of years in advance. In the short term, I think he is less consistent, he tends to overtrade currencies, maybe because he is a gambler at the end of the day (obviously a bloody good one looking at his net worth). 

He did call for a big fall in UK property during the financial crisis but I don't think he anticipated the size of government intervention and stimulus. 

Overall though I'm inclined to agree with his call for a 20 - 30 percent fall in prices.

 

30% off takes us back to average house/salary mulitple of 7x single salary and 4.25x joint...............that's not a fall,that's a blip on the way down

[Sancho Panza]

2 hours ago, mathschoc said:

I personally need a HPC, but in my town many more owners are taking their home off the market than reducing significantly enough to cause a crash, I have looked at the stats on this for too long. I was convinced of a HPC in 2016, maybe it needs another trigger.

If it does not happen this year I will be emigrating.

It's been happening in Leicester.I've been trying to work out why we've shrinking inventory in Leicester and it has to be mortgage related ie people are struggling to transact due to issues moving mortgages.

When checking LE2 there are 447 houses flats for sale(admittedly including dual listings).When including SSTC the number shoots up to 792.Normally about 25% of the inventory here is tied up in SSTC currently it's 44%.

Even at 792,that's still a lowish figure historically for inventory in that postcode sector.

[thisisthisitmaybe]

35 minutes ago, Sancho Panza said:

30% off takes us back to average house/salary mulitple of 7x single salary and 4.25x joint...............that's not a fall,that's a blip on the way down

Yes not much to celebrate is it, especially in London.

The only hope is that UK wages go up exponentially to narrow the gap. Mellon makes a point about the gig economy turning into proper salaried jobs...I can't see it happening myself.

In truth, only a full blown financial crisis will bring UK house prices back into the 4 x salary range.

[nothernsoul]

It depends on what causes the crash and what measures the government put in place to prop things up. In 2008 interest rates were slashed to near zero protecting those with massive mortgages who still retained a secure income. From my experience the repossesions were at the lower end of the market, those on lower insecure wages, working in areas hit badly by the recession, who were already too deep in arrears for ultra low interest rates to rescue them.

I have a feeling worst hit areas will be outside london and its remit. Four bed detached suburban houses, owned by well off boomers, in places like Altringham. Not attractive to investors, in areas of low productivity and low wages. 

 

 

[Arpeggio]

2 hours ago, dgul said:

There is just too much liquid wealth on the sidelines, waiting for a 5%-off bargain.

The water is so great over here let's fill our lungs 5% air before diving in to look for those ocean bed pearls. Very wise indeed lol.

 

1 hour ago, crashmonitor said:

Virtually nobody buys a house anymore, it's either a transfer from another house, inherited wealth from housing or parental assistance.

That's what I thought. Glad to see it said not just me think it.

 

5 minutes ago, nothernsoul said:

I have a feeling worst hit areas will be outside london and its remit. Four bed detached suburban houses, owned by well off boomers, in places like Altringham. Not attractive to investors, in areas of low productivity and low wages.

Just checking, but do you mean 4 bed detached BoomerBurbs are low productivity and low wages? I see how they could be seeing as much of the wealth is HPI itself.

[thewig]

2 hours ago, dgul said:

IMO we can't have an effective property crash in the UK at the moment. There is just too much liquid wealth on the sidelines, waiting for a 5%-off bargain.  It is completely ingrained now; I've had so many conversations with people who have said that there is only one way to invest, and that they've got money waiting for the right moment -- and they are all keen to extract money from pensions as soon as they've got an excuse.

I know this is contradictory -- they're committed to property as the only worthwhile investment class and they're waiting for prices to turn to give them a bargain -- but that is how they think.  And there are loads and loads of them.

You'd think that the way forward would be to have a crash, to break their confidence -- that should have occurred in 2004 and perhaps 2007... but IMO it is now too late, there is so much belief in property that they'd chase the market down with every fractional reduction, supporting prices, with new entrants coming in with additional support for every fractional reduction.  Okay, we might get 10% down, but that only takes prices back a couple of years -- I can't really see us getting back to 2004 prices (when we should have had the crash!), let alone back to 1995 or so.

I think that the only move that can (actually, must) occur now is for their wealth to disappear.  This is probably currency/inflation related, but might include things like loss of benefits/pension.  

Now, prices will go down, but IMO we've got about 15 years of slow grind, rather than a sharp shock, and it might be completely hidden by currency/inflation moves.

You've explained perfectly how speculative bubbles are blown, but have omitted that's exactly how they burst too. Sentiment blows them and sentiment bursts them. These mythical buyers waiting for 5% off will happily wait for another 5% off once prices turn, that's how markets crash and bubbles burst. IMO.

Edited January 28, 2017 by thewig

[spyguy]

IRs will go up a bit. typical mortgage apr is 3%+. 

 

Dont forget hiw many people are o tax credits - 50 of families get the bulk if their money ftom tax credits.

Weve also got a huge mugrant population, most drawing benefits. Tgese will be off when they are cut.

Theres no big thing, just several medium things.

[Sancho Panza]

1 hour ago, thisisthisitmaybe said:

Yes not much to celebrate is it, especially in London.

The only hope is that UK wages go up exponentially to narrow the gap. Mellon makes a point about the gig economy turning into proper salaried jobs...I can't see it happening myself.

In truth, only a full blown financial crisis will bring UK house prices back into the 4 x salary range.

x2.They've been praying for a salary catch up for 9 years...been a long time coming

[Sancho Panza]

20 minutes ago, thewig said:

You've explained perfectly how speculative bubbles are blown, but have omitted that's exactly how they burst too. Sentiment blows them and sentiment bursts them. These mythical buyers waiting for 5% off will happily wait for another 5% off once prices turn, that's how markets crash and bubbles burst. IMO.

markets often sell off on no news.

[thewig]

6 minutes ago, Sancho Panza said:

markets often sell off on no news.

totally. speculative bubbles by their very nature have lost all contact with fundamental (or technical) drivers and are in a pure mania. In this mania phase, any news will get interpreted as a driver of higher prices. Sentiment feeds on sentiment etc. Until prices turn, then the FEAR takes over and the market crashes spectacularly. You do not get nice little 5% pullbacks in bubbles, you get moves up up up up up up and up, then you get 5% down, then 15% down then 50% down. This happens with every market ever, and every time people think this time is different. Maybe it will be different this time. Except it won't be because it can't be, because bubbles can only do what they do, bubbles aren't able to draw in new buyers on 5% pullbacks, because when bubbles turn, they stay turned. Its the law of the market. IMO.

[nothernsoul]

To clarify, the best bits of middling and below towns. The type of place that goes between 400 and 500 grand in the northwest, nice, but nothing special They are owned mainly by boomers retired/near retirement, good public sector pensions. They are the only group with decent income in the north. When they need to sell there will be nobody to buy off them at anywhere near current prices.

[Bunfight]

8 minutes ago, nothernsoul said:

To clarify, the best bits of middling and below towns. The type of place that goes between 400 and 500 grand in the northwest, nice, but nothing special They are owned mainly by boomers retired/near retirement, good public sector pensions. They are the only group with decent income in the north. When they need to sell there will be nobody to buy off them at anywhere near current prices.

This is anecdotal but relevant I think...

went to see a 4 bed detached yesterday on Teesside.  No intention of paying what they want, 240k.  Current owners are 2 retired teachers, just waiting for some mug to buy it and hand them a lovely pension top up.

estate agent was full of it with talk of lots of interest, it's been on the market for over 6 months.

I'm the type of person who should be buying these houses but I'm not playing.  A crash is coming and I'm not going to be left holding the shitty parcel.

Local average wage where I live is circa 20k.

[spyguy]

13 minutes ago, nothernsoul said:

To clarify, the best bits of middling and below towns. The type of place that goes between 400 and 500 grand in the northwest, nice, but nothing special They are owned mainly by boomers retired/near retirement, good public sector pensions. They are the only group with decent income in the north. When they need to sell there will be nobody to buy off them at anywhere near current prices.

I use scarborough as my metric for this.

Some very nice houses in nice areas. 

Average wage, if youve a job, is 19k. There will be few 100k mortgages.

The last 10 years has, id guess, seen the number of probates exceed the number of sales. 

Public sector jobs pay and benefits are going to fall; uk knackered. 

5 years time the majority of pensioners will be be defined contribution oensions, on 60/minth saving.

[One-percent]

12 minutes ago, Bunfight said:

This is anecdotal but relevant I think...

went to see a 4 bed detached yesterday on Teesside.  No intention of paying what they want, 240k.  Current owners are 2 retired teachers, just waiting for some mug to buy it and hand them a lovely pension top up.

estate agent was full of it with talk of lots of interest, it's been on the market for over 6 months.

I'm the type of person who should be buying these houses but I'm not playing.  A crash is coming and I'm not going to be left holding the shitty parcel.

Local average wage where I live is circa 20k.

240 for a house on teeside? Feck.

[dgul]

1 hour ago, thewig said:

You've explained perfectly how speculative bubbles are blown, but have omitted that's exactly how they burst too. Sentiment blows them and sentiment bursts them. These mythical buyers waiting for 5% off will happily wait for another 5% off once prices turn, that's how markets crash and bubbles burst. IMO.

But what is the speculative bubble in?  It was in property.  It is now in government bonds and foreign currency (one of which is sterling).  What happens when that bubble bursts?

[spyguy]

1 hour ago, Bunfight said:

This is anecdotal but relevant I think...

went to see a 4 bed detached yesterday on Teesside.  No intention of paying what they want, 240k.  Current owners are 2 retired teachers, just waiting for some mug to buy it and hand them a lovely pension top up.

estate agent was full of it with talk of lots of interest, it's been on the market for over 6 months.

I'm the type of person who should be buying these houses but I'm not playing.  A crash is coming and I'm not going to be left holding the shitty parcel.

Local average wage where I live is circa 20k.

Price it in 2 teachers salaries - 150k tops And assumes continued low irs and one does not leave to have kids.

Itll sit there til thet die. Literally.

[nothernsoul]

Public sector wages and benefits have already fallen; outside london and its remit that is the backbone of most areas. I dont think a one off event will immediately cause a housing crash, mainly because houses are illiquid and british homeowners will hang on way beyond what owners of other asset classes would during an economic crisis. You dont get a short window of opportunity to jump in as you do with shares.

However, I think the population demographics and structural failings of the uk economy is what will eventually pull house prices down. If Britain was just london and the surrounding areas, it could have an economy like switzerlands, based on finance and a few high value industries. Sadly we're over six times the size of switzerland. Without empire and industry its just public spending and private borrowing that keeps the long tail of this country going.

 

[thewig]

41 minutes ago, dgul said:

But what is the speculative bubble in?  It was in property.  It is now in government bonds and foreign currency (one of which is sterling).  What happens when that bubble bursts?

Technically the bubble is in DEBT. With crap houses being the easiest mechanism to force more DEBT onto the masses. If the next generation are educated aka programmed that taking on a 50year joint mortgage is the grown up respectable thing to do then it could have a lot further to run but current transaction volumes suggest this bubble is done.

Where the hot money flows next? Gold bitcoin pharma microchips fake space travel who knows. The only thing which is certain is this is no different to any other bubble in history. Imo