henry the king Posted June 26, 2017 Share Posted June 26, 2017 10 reasons the house price boom is over. 1, economic uncertainty around brexit will cause a weaker economy. 2, interest rates cannot go down further. The bank of england has already got them at record lows. They can only go one way now. 3, the government schemes are already in place, there will not be additional schemes. Worst case scenario is extension of existing schemes. 4, lower immigration due to brexit 5, the young are now a political voice in the uk, and all parties will try to court them with better renting regulations that hurt btlers bottom line. 6, a realistion that btl needs to be taxed. They are an easy political target that must be hit on now we have the young with a political voice. 7, inflation squeezes living standards similar to in 2011. This means less money to pay mortgages which means lower house prices. 8, massive political pressure to build houses...at last. More supply. Expect to see more and more loosening of building regulations. 9, crackdown on overseas buyers is now on the political agenda, again hurting demand 10, the boe is now making noises about ir rises. Carney is lacking influence as most of the members will now look to follow the fed with interest rate rises. Again inflation will force their hand. So we have a situation where the boe and government are already "all in". They have no more levers to use. And house prices are no longer going up. So it is a logical inevitability that house prices will not go up anymore. The economy is slowing, living standard declining, disposable income for mortgages declining, brexit to come, and massive political pressure from the election and the fire to build more houses and to hit the land hoarders. Btl tax changes will play a role too, expect more to come here though. So the question is, will house prices crash? I doubt it. I expect several years of real term falls or even slight falls in nominal terms. One thing is for sure. House prices cannot go up anymore. Quote Link to comment Share on other sites More sharing options...
Greg Bowman Posted June 27, 2017 Share Posted June 27, 2017 9 hours ago, henry the king said: 10 reasons the house price boom is over. 1, economic uncertainty around brexit will cause a weaker economy. 2, interest rates cannot go down further. The bank of england has already got them at record lows. They can only go one way now. 3, the government schemes are already in place, there will not be additional schemes. Worst case scenario is extension of existing schemes. 4, lower immigration due to brexit 5, the young are now a political voice in the uk, and all parties will try to court them with better renting regulations that hurt btlers bottom line. 6, a realistion that btl needs to be taxed. They are an easy political target that must be hit on now we have the young with a political voice. 7, inflation squeezes living standards similar to in 2011. This means less money to pay mortgages which means lower house prices. 8, massive political pressure to build houses...at last. More supply. Expect to see more and more loosening of building regulations. 9, crackdown on overseas buyers is now on the political agenda, again hurting demand 10, the boe is now making noises about ir rises. Carney is lacking influence as most of the members will now look to follow the fed with interest rate rises. Again inflation will force their hand. So we have a situation where the boe and government are already "all in". They have no more levers to use. And house prices are no longer going up. So it is a logical inevitability that house prices will not go up anymore. The economy is slowing, living standard declining, disposable income for mortgages declining, brexit to come, and massive political pressure from the election and the fire to build more houses and to hit the land hoarders. Btl tax changes will play a role too, expect more to come here though. So the question is, will house prices crash? I doubt it. I expect several years of real term falls or even slight falls in nominal terms. One thing is for sure. House prices cannot go up anymore. Welcome and what a good post. Although I have to declare to you a vested interest in having exchanged last week and moving into rented next week. Last time we did that was Nov 2007 and bought again Dec 2009. There was a crash the house we bought was sold to us for £100k less than the vendor paid for it just two years previously and was in good condition so much so we have only spent about £15k on it in that time mostly decoration. The crazy schemes stopped the crash but they haven't the money this time. An eleventh factor is that people are waking up to the cost of home ownership - Stamp duty, Council tax, ,insurance, maintenance, solicitors fees I think it will go down 20% or so but good houses in areas that are established will hold value but deals will be easier to do. No different from prestige cars (right history, mods recalls done etc) Quote Link to comment Share on other sites More sharing options...
kibuc Posted June 27, 2017 Share Posted June 27, 2017 10 hours ago, henry the king said: 10 reasons the house price boom is over. 1, economic uncertainty around brexit will cause a weaker economy. The economy has been week for years, it did not prevent prices for setting new highs. 10 hours ago, henry the king said: 2, interest rates cannot go down further. The bank of england has already got them at record lows. They can only go one way now. Of course they can. They can go negative. Record lows? Records are made to be broken. 10 hours ago, henry the king said: 3, the government schemes are already in place, there will not be additional schemes. Worst case scenario is extension of existing schemes. Why? 10 hours ago, henry the king said: 4, lower immigration due to brexit Or, higher immigration due to people trying to make it before the cut-off. 10 hours ago, henry the king said: 5, the young are now a political voice in the uk, and all parties will try to court them with better renting regulations that hurt btlers bottom line. Hashtag actions and festival chants do not equal "political voice". I don't want to be an ass... but I can't help it House prices absolutely can go higher. Country-wide HTB 50% anyone? Non-recourse no-collateral government loans (or is it HTB again)? QE 5, 6, 7? The govt still has plenty of power to keep the HPI going. Whether it will is a different question. Quote Link to comment Share on other sites More sharing options...
fandanman Posted June 27, 2017 Share Posted June 27, 2017 "Cannot go up further" Is your prediction forever or does it have a timeframe on it? Quote Link to comment Share on other sites More sharing options...
RentingForever Posted June 27, 2017 Share Posted June 27, 2017 10 hours ago, henry the king said: 8, massive political pressure to build houses...at last. More supply. Expect to see more and more loosening of building regulations.. I agree with your general point and most of the specifics, but after Grenfell Tower I suspect we'll see a *tightening* of building regulations. Quote Link to comment Share on other sites More sharing options...
Simon Taylor Posted June 27, 2017 Share Posted June 27, 2017 10 minutes ago, RentingForever said: I agree with your general point and most of the specifics, but after Grenfell Tower I suspect we'll see a *tightening* of building regulations. I agree. It's possible the OP meant planning regulations which almost certainly will change now politicians have realised that ignoring the younger voter is an essential precursor to not getting re-elected. I'm all for free markets, especially in housing. But if there does have to be regulation, then it should be on what is built , not where it is built. A freer land market will mean cheaper land and this means more money for good design and better quality of build. It will also remove the dominance of the big housebuilders and their shoddy, pokey, identikit rubbish they build all over the country. A slashing back of planning law will make it easier for self build and low volume small developers and these tend to produce better quality housing. Quote Link to comment Share on other sites More sharing options...
Funn3r Posted June 27, 2017 Share Posted June 27, 2017 1. The price is too damn high 2. The price is too damn high 3. The price... etc. Quote Link to comment Share on other sites More sharing options...
zugzwang Posted June 27, 2017 Share Posted June 27, 2017 Fear of a Corbyn govt. The One Percenters must be aware that they have to tread very careful now or their wealth extraction schemes will be smashed to pieces, Quote Link to comment Share on other sites More sharing options...
adarmo Posted June 27, 2017 Share Posted June 27, 2017 11 hours ago, henry the king said: 10 reasons the house price boom is over. We already have economic uncertainty around Brexit and two general elections within the space of as many years. They seem to be holding up fairly well thus far. Might be easier to do a deal, and houses on the outskirts of good places, or gaffs in naff areas might take a bit of a beating but solid detached family homes in good established market towns (what most people aspire to wanting) are in short supply, and they aren't building any more old established market towns. Let me put it like this. If Brexit was cancelled tomorrow what would happen? If there had been a clear majority for any party what would happen? Brexit has crashed the pound which actually is good for exporters and good for domestic aggregate supply (and jobs) Cheap pound also makes a foreigner's punt on a property cheaper than before (although the rental income is also lower and carries higher perceived risk) What insight to you have to govt schemes? HTB 2, 3, 4? MIRAS? Even paying your mortgage? Lifetime ISA with 30% or 40% bonus? Abolition of SDLT for FTB, or for all? Repeal of S24 (I hope not but who knows?). What about 25 year fixed rate mortgages underwritten by the government (the US set this up during and after the Great Depression). Lower immigration is not net negative immigration and providing it's net positive and the population is rising faster than we build accommodation for we are still reducing that gap between supply and demand Inflation currently is ERPT inflation and is not a concern within the BoE. entrenched inflation is an issue but inflation erodes the real value of your debt while the asset tends to appreciate. Last I heard from Carney was that now is not the time to raise rates. My first mortgage is at 1.54% and that's below the rate of inflation. I am literally being paid to borrow money. The real value of the debt would be lower at the end of the fixed term with the interest rolled up. That's not including the money lost renting a flat with idiot neighbours unable to use a bin or park considerately. Quote Link to comment Share on other sites More sharing options...
Funn3r Posted June 27, 2017 Share Posted June 27, 2017 2 minutes ago, adarmo said: Brexit has crashed the pound which actually is good for exporters and good for domestic aggregate supply (and jobs) Logically you would expect that UK companies selling things abroad would be loving it. In practice though it doesn't feel like that at all. Show me someone who is doing well out of the crashed pound and I will show you 100x who are paying more for less and not happy about it. Not to mention savers who not only have been hammered by low IR but now also had their capital haircutted relative to other world currencies. Quote Link to comment Share on other sites More sharing options...
“Nasty Piece of work” Posted June 27, 2017 Share Posted June 27, 2017 Carnegie getting the banks to ear mark more tit's-up money - he knows we will follow The USA. Quote Link to comment Share on other sites More sharing options...
dougless Posted June 27, 2017 Share Posted June 27, 2017 34 minutes ago, zugzwang said: Fear of a Corbyn govt. The One Percenters must be aware that they have to tread very careful now or their wealth extraction schemes will be smashed to pieces, Great post. The wealthy round here are still looking a little smug and nothing seems to stem their desire for bigger houses and cars; they have no shame. Quote Link to comment Share on other sites More sharing options...
pmgdawau Posted June 27, 2017 Share Posted June 27, 2017 11. eventually tidal wave of elderly will have to sell their homes and younger generation won't have the money to buy at present prices, especially if mortgages get harder to get. I've got 9 neighbouring houses with retired single/couple occupants living in 4 bed houses, only 3 houses with productive families Quote Link to comment Share on other sites More sharing options...
henry the king Posted June 27, 2017 Author Share Posted June 27, 2017 1 hour ago, kibuc said: The economy has been week for years, it did not prevent prices for setting new highs. Of course they can. They can go negative. Record lows? Records are made to be broken. Why? Or, higher immigration due to people trying to make it before the cut-off. Hashtag actions and festival chants do not equal "political voice". I don't want to be an ass... but I can't help it House prices absolutely can go higher. Country-wide HTB 50% anyone? Non-recourse no-collateral government loans (or is it HTB again)? QE 5, 6, 7? The govt still has plenty of power to keep the HPI going. Whether it will is a different question. The economy was strong for the last few years. We had the strongest growth in the g7 and real wages were growing faster than inflation. This was since around 2012 or 2013. Before that we had no real terms wage growth and the economy was weaker. This hit house prices during this peroid. We appear to be back at real terms wage decreases again and this will hit house prices. Real wages are up about 6% since january 2013. Between 2010 and 2013 wage growth was negative and this is what hits house prices. We are returning to a peroid of negative wage growth which will hit house prices considerably. https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/articles/supplementaryanalysisofaverageweeklyearnings/latest You can see the data here. It is clear. Of course if inflation falls and wage growth picks up then house prices can climb. But this looks unlikely. It is simple math. The higher the cost of living means the less money available for mortgage repayments which means people cannot afford to pay as much. We saw this from 2010 to 2012 when real terms wages growth was negative. Quote Link to comment Share on other sites More sharing options...
henry the king Posted June 27, 2017 Author Share Posted June 27, 2017 2 hours ago, fandanman said: "Cannot go up further" Is your prediction forever or does it have a timeframe on it? I predict real terms falls or stagnation for the next 2 years at least, possibly longer. We already have close to stagnation over the last 12 months in real terms. Brexit uncertainty is going to ramp up now the deal is being done. Quote Link to comment Share on other sites More sharing options...
henry the king Posted June 27, 2017 Author Share Posted June 27, 2017 1 hour ago, adarmo said: We already have economic uncertainty around Brexit and two general elections within the space of as many years. They seem to be holding up fairly well thus far. Might be easier to do a deal, and houses on the outskirts of good places, or gaffs in naff areas might take a bit of a beating but solid detached family homes in good established market towns (what most people aspire to wanting) are in short supply, and they aren't building any more old established market towns. Let me put it like this. If Brexit was cancelled tomorrow what would happen? If there had been a clear majority for any party what would happen? Brexit has crashed the pound which actually is good for exporters and good for domestic aggregate supply (and jobs) Cheap pound also makes a foreigner's punt on a property cheaper than before (although the rental income is also lower and carries higher perceived risk) What insight to you have to govt schemes? HTB 2, 3, 4? MIRAS? Even paying your mortgage? Lifetime ISA with 30% or 40% bonus? Abolition of SDLT for FTB, or for all? Repeal of S24 (I hope not but who knows?). What about 25 year fixed rate mortgages underwritten by the government (the US set this up during and after the Great Depression). Lower immigration is not net negative immigration and providing it's net positive and the population is rising faster than we build accommodation for we are still reducing that gap between supply and demand Inflation currently is ERPT inflation and is not a concern within the BoE. entrenched inflation is an issue but inflation erodes the real value of your debt while the asset tends to appreciate. Last I heard from Carney was that now is not the time to raise rates. My first mortgage is at 1.54% and that's below the rate of inflation. I am literally being paid to borrow money. The real value of the debt would be lower at the end of the fixed term with the interest rolled up. That's not including the money lost renting a flat with idiot neighbours unable to use a bin or park considerately. The main argument is that real term wages will decrease and this will hit house prices. This is coupled with the fact the boe and government cannot do much more intervention from here. Then we have slowing growth and business confidence both in the uk and around the world. The latest gdp figures were bad and all the surveys for the general economy weak, which suggests weaker or negative growth to come for the next few years. A weak economy hurts house prices and so do lowering real terms wages. These are all facts that you can research for yourself if you like. The other reasons listed are speculative, of course some believe brexit will be good for the economy for example. But the main thrust of the post is that lower real terms wages and a weakening economy will hurt house prices. This is not rocket science and i am surprised to see anyone arguing it. The data is all there to back up what i am saying. Fwiw, i am not a natural bear who sees economic disaster coming every year. I just go by the data and the data looks bad for uk living standards, uk growth and thus, house prices. The political climate shifting also will play an impact but probably more in the longer term as policies take time to develop. There is political shift towards an emphasis on helping younger people and housing is included in this. Quote Link to comment Share on other sites More sharing options...
Locke Posted June 27, 2017 Share Posted June 27, 2017 The market can stay irrational for longer than you can stay solvent. Quote Link to comment Share on other sites More sharing options...
henry the king Posted June 27, 2017 Author Share Posted June 27, 2017 Just now, Locke said: The market can stay irrational for longer than you can stay solvent. It isnt about irrational. People will afford to pay less and less as real terms wages decline. Quote Link to comment Share on other sites More sharing options...
longgone Posted June 27, 2017 Share Posted June 27, 2017 i love people who base everything on rules , or past decisions. There is no democracy. There are no rules. There is no Logical outcome. Easiest way is for forced high inflation based on new rules , or just hand out free money to people who don`t have any. they have been dishing it out to home owners for years have they not. Quote Link to comment Share on other sites More sharing options...
anonlymouse Posted June 27, 2017 Share Posted June 27, 2017 35 minutes ago, Locke said: The market can stay irrational for longer than you can stay solvent. As someone who's outside of the market (FtB living with family paying peppercorn rent), I can stay solvent longer than the market can stay irrational. It's my patience that's wearing thin Quote Link to comment Share on other sites More sharing options...
a j Posted June 27, 2017 Share Posted June 27, 2017 Home ownership and rental conditions are now a political issue. Read the comments in the Conservativehome website, or for that matter the change in mumsnet comments over the years. Quote Link to comment Share on other sites More sharing options...
Wayward Posted June 27, 2017 Share Posted June 27, 2017 Many here have been thinking prices can't go any further for years. You don't appreciate how powerful the forces ranged against us are...they will stop at nothing. It is apparent that they will readily risk sinking the entire economy and risk social unrest to protect prices...The first priority of state used to be to defend the realm...this has fallen into second place after propping up the high price of property. Nothing is more important to the rich and powerful. Quote Link to comment Share on other sites More sharing options...
Locke Posted June 27, 2017 Share Posted June 27, 2017 40 minutes ago, henry the king said: It isnt about irrational. People will afford to pay less and less as real terms wages decline. With lower wages, people can afford less shelter, but housing is not for shelter. Housing has become an investment asset whose price is related to its capability to shield wealth from predatory governments or inflation (but I repeat myself). Its price is therefore dislocated from its shelter value and peoples' wages are less important to the housing price than other people's investment wealth which is (pardon the pun) looking for a home. The irrationality is in this dislocation which treats a shelter resource as if it has value outside of that. Once its shelter value decreases (excess housing, decreased population, population relocation, etc) to a point where the fantasy is no longer sustainable to most investors, then the price of housing relocates down, closer to its shelter value. It is entirely possible that this keeps spinning for years, but I find it unlikely, because the sentiment seems to be turning. Do not be surprised if prices continue to rise. Quote Link to comment Share on other sites More sharing options...
dougless Posted June 27, 2017 Share Posted June 27, 2017 7 minutes ago, Wayward said: Many here have been thinking prices can't go any further for years. You don't appreciate how powerful the forces ranged against us are...they will stop at nothing. It is apparent that they will readily risk sinking the entire economy and risk social unrest to protect prices...The first priority of state used to be to defend the realm...this has fallen into second place after propping up the high price of property. Nothing is more important to the rich and powerful. I am afraid I have to agree with this. I have been predicating a house price correction since 2003; shows how little I know! It does seem like continuing house price inflation is the top priority of recent Governments. Its a sad indictment of our country when it seems to be run for the few at the expense of the many. Quote Link to comment Share on other sites More sharing options...
ElPapasito Posted June 27, 2017 Share Posted June 27, 2017 12. Public Sector wage inflation about to kick off as the 1% freeze is lifted. Interest rates will have to rise once pay is rising. Rising IRs is the death knell of HPI Quote Link to comment Share on other sites More sharing options...
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