Jump to content
House Price Crash Forum

Homes on the brink: In the wake of dire warning on house market, fresh data shows prices slipping


Recommended Posts

1 minute ago, adarmo said:

You are incorrect.

1. The debt will fall in real terms provided inflation is positive regardless of wage increases or not. What you might mean is that this would be of no benefit to me unless wages increase. Therefore;

2. If wage increases are below inflation (any index you fancy) the value of the mortgage debt relative to income will fall. 

So if you have 10% inflation and 1% wage inflation you think your mortgage will be less of a burden when IRs would have also risen .....that was more my point 

I understand the nominal/real terms and effects but they will not make paying your mortgage any easier in the above scenario 

Link to post
Share on other sites
  • Replies 53
  • Created
  • Last Reply

Top Posters In This Topic

3 minutes ago, long time lurking said:

So if you have 10% inflation and 1% wage inflation you think your mortgage will be less of a burden when IRs would have also risen .....that was more my point 

I understand the nominal/real terms and effects but they will not make paying your mortgage any easier in the above scenario 

If inflation was 10% my pay rises would be very close to that. But if the scenario you describe could ever exist (when has that existed in the UK?) I am personally shielded from a lot of these costs since I can run, cycle, train or drive to work I can ignore transport costs should become too high. We as a couple also run a large surplus so I'm not overly concerned about this in the short term and certainly not in the long term since wages track inflation in the long run.

Here's a link demonstrating http://webarchive.nationalarchives.gov.uk/20160106022019/http://www.ons.gov.uk/ons/rel/elmr/an-examination-of-falling-real-wages/2010-to-2013/art-an-examination-of-falling-real-wages.html

 

Link to post
Share on other sites
8 hours ago, ftb_fml said:

So in this example a 20% fall means that for approximately the same montly payment cost you can pay your mortgage off 8 years or 25% earlier, saving you over £30k in interest payments. While the sale price of the property falls by £50k the total cost falls by over £80k.

All good but you assume the interest rate will be the same in that climate; that will not be the case banks need to make their money somehow, they've grown the number of mortgage contracts out there on the bait of cheap rates and the reason the loans so large is inflated priced.

So once they can't write out that many more new loans they will seek to grow revenue by milking the market on the back of slightly increased IR.

Link to post
Share on other sites
8 minutes ago, long time lurking said:

Look no  further than the early 90`s for a very similar scenario then look at IRs for that period 

Would you have a link?

Page 34 here says you're (again) wrong.

https://www.ons.gov.uk/ons/rel/elmr/economic-and-labour-market-review/no--8--august-2010/labour-market-in-1980-s--1990-s-and-2008-09-recession.pdf

This is change in real wages. If pay rises were 1% and inflation 10% then real wage growth would be circa -9%

 

Link to post
Share on other sites
11 hours ago, adarmo said:

This is the view we took. It's always a risk, and yes there's a tonne of scary news out there (scary if you're FTBs) but the thing with waiting is that we would have missed the place we've been looking for for well over a year. There's no guarantee anything like this would come up again and certainly in a slow low volume market it's even less likely.

One of the things I often hear is that when the market peaks, all the "good" properties come onto the market as the smart money downsizes or exits the market, and then when the market bottoms out the only properties being sold will be run down rubbish sold by poor people who are forced sellers, death/divorce etc.

But I do think that this time could be different, so many people have been drawn in by the lure of free gains from the 'magic money tree' of UK property that a lot of accidental landlords are renting out perfectly good family homes - they won't realise what's happening until it's already too late.

Link to post
Share on other sites
3 minutes ago, Habeas Domus said:

One of the things I often hear is that when the market peaks, all the "good" properties come onto the market as the smart money downsizes or exits the market, and then when the market bottoms out the only properties being sold will be run down rubbish sold by poor people who are forced sellers, death/divorce etc.

But I do think that this time could be different, so many people have been drawn in by the lure of free gains from the 'magic money tree' of UK property that a lot of accidental landlords are renting out perfectly good family homes - they won't realise what's happening until it's already too late.

No. the demographics are overwighted to older, property owners. Not going to happen.

There will be wave after wave of boomer property hitting the market.

The incoming generation isnot large enough to buy it all.

Link to post
Share on other sites
7 minutes ago, Habeas Domus said:

One of the things I often hear is that when the market peaks, all the "good" properties come onto the market as the smart money downsizes or exits the market, and then when the market bottoms out the only properties being sold will be run down rubbish sold by poor people who are forced sellers, death/divorce etc.

But I do think that this time could be different, so many people have been drawn in by the lure of free gains from the 'magic money tree' of UK property that a lot of accidental landlords are renting out perfectly good family homes - they won't realise what's happening until it's already too late.

You've not quite said it but.... "This time it is different" are the most expensive words in the English language. 

You are correct and I've seen several larger family homes up for rent, but this is exceptional and I'm guessing accidental for people having to relocate for work or other reasons but plan to return. Large family homes are not ideal BTL. They require a lot of maintenance and yields are way lower compared to the Tesco Value Slave Boxes on offer. I guess if I was offered an opportunity abroad and the money and role were right I'd do the same. 

Link to post
Share on other sites
1 hour ago, adarmo said:

If inflation was 10% my pay rises would be very close to that. But if the scenario you describe could ever exist (when has that existed in the UK?) I am personally shielded from a lot of these costs since I can run, cycle, train or drive to work I can ignore transport costs should become too high. We as a couple also run a large surplus so I'm not overly concerned about this in the short term and certainly not in the long term since wages track inflation in the long run.

Here's a link demonstrating http://webarchive.nationalarchives.gov.uk/20160106022019/http://www.ons.gov.uk/ons/rel/elmr/an-examination-of-falling-real-wages/2010-to-2013/art-an-examination-of-falling-real-wages.html

 

I've no doubt your confidence in your ability to climb the ladder is well founded. However most people won't be doing that and are working on minimum wage zero hour contracts.

If you look back to the seventies people did get high pay rises but not as high as inflation and then Maggie shut down industry.

The trouble is the bit of the UK economy that is actually adding value has to globally compete without much of an advantage.

Link to post
Share on other sites
12 minutes ago, frederico said:

I've no doubt your confidence in your ability to climb the ladder is well founded. However most people won't be doing that and are working on minimum wage zero hour contracts.

If you look back to the seventies people did get high pay rises but not as high as inflation and then Maggie shut down industry.

The trouble is the bit of the UK economy that is actually adding value has to globally compete without much of an advantage.

Well let's hope so ;)

The thing is wages follow inflation albeit with a lag so I stand by my earlier comments in that in the short term I am not so concerned because I am not living beyond my means and over the long term not concerned at all because wages will keep up with inflation. 

The 1977 gap between inflation and earnings was high, maybe 10% but by 1978 the gap was the other way with wage rises overtaking inflation by about 10%. 

If it was 1976 and I'd just taken out my mortgage then by 1979 It would be around 15% less in real terms and take up a lesser chunk of my take home. 

The real risk for mortgage holders is deflation and this is something I believe the central bank will stop at nothing (literally nothing) to avoid. 

Link to post
Share on other sites
13 hours ago, winkie said:

A correction would be a good thing for almost everyone.....

Really?

Except those with mortgages, reverse mortgages / equity release, funds / investments in property, etc etc...

And with a big correction inflation / lending rates would likely much higher.

Yeah the 'correction' in reality would cause significant damage to the UK's economy and deter investment.

Its a complicated mess. Combine this with the UK's demographic time bomb and it becomes even more grim.

So...almost everyone wouldn't welcome it.

Really.

Edited by cashinmattress
Link to post
Share on other sites
37 minutes ago, cashinmattress said:

Really?

Except those with mortgages, reverse mortgages / equity release, funds / investments in property, etc etc...

And with a big correction inflation / lending rates would likely much higher.

Yeah the 'correction' in reality would cause significant damage to the UK's economy and deter investment.

Its a complicated mess. Combine this with the UK's demographic time bomb and it becomes even more grim.

So...almost everyone wouldn't welcome it.

Really.

I wonder how much of the 'demographic timebomb' is actually caused by the housing crisis in the first place?

Link to post
Share on other sites
9 hours ago, satch said:

TPTB are exponents in that there are MPs who used to (maybe still do) own properties but rent them to other MPs rather than love in them to get round the fact the taxpayer no longer pays their second mortgage. Both MPs rent (to each other) and lo and behold the rent can be claimed on expenses! Wonder if David Lammy claims rent even though he is a landlord with a property in Tottenham ....

quick goole and he seems to be an old hand .... from 2004

HARINGEY taxpayers have been forking out for Tottenham MP David Lammy to rent a second home in south London.

Mr Lammy admitted the expense in the first published account of MPs’ spending, and is among 32 outer London MPs claiming the second home allowance, worth up to £20,333 a year…

Mr Lammy said he stayed at the second home for three nights a week when he was working at Westminster, spending the rest of his week at his main home on the Harringay Ladder, 28 minutes from Westminster by tube.

He claimed £12,041 for the home between April 2003 and March 2004.

As a landlord Lammy pontificates on housing and the problems of renters ....

 

Link to post
Share on other sites

https://www.publications.parliament.uk/pa/cm/cmregmem/170502/lammy_david.htm

 

Quote

2. (b) Any other support not included in Category 2(a)

Name of donor: Lee Valley Estates Ltd
Address of donor: 7 Crane Heights, Waterside Way, London N17 9GE
Amount of donation or nature and value if donation in kind: £10,000
Date received: 2 December 2016
Date accepted: 2 December 2016
Donor status: limited liability partnership
(Registered 14 December 2016)

6. Land and property portfolio: (i) value over £100,000 and/or (ii) giving rental income of over £10,000 a year

Residential property in Tottenham: (i) and (ii).

Edited by DrBuyToLeech
Link to post
Share on other sites
11 hours ago, long time lurking said:

For sure ,but we have the highest employment for decades ? show me wage growth 

Real wages declined. I don't need to show a chart, as it's pointless. This group is aligned towards the same prospective.

Edited by maverick73
Link to post
Share on other sites

I can see TPTB not waiving HTB money too, which will be outrageous - Imagine the political fall out from, effectively, giving 40% to London homeowners and 20% to others if there was a huge crash  Will make the bung given to the DUP look like chicken feed.

Link to post
Share on other sites
On ‎09‎/‎07‎/‎2017 at 10:21 AM, frederico said:

The problem is, if you get a purchase like this right it can save you a fortune over the life of the mortgage. People very rarely look at the big picture, how much will you pay over the full term.

yes...forget studying hard at school, forget getting a good job, forget working hard to advance your career, forget talent....between my peers it is when you bought property that determines prosperity for lifetimes.  Choose wisely.  Does anyone really think now is a sensible time....

Link to post
Share on other sites
14 hours ago, cashinmattress said:

Really?

Except those with mortgages, reverse mortgages / equity release, funds / investments in property, etc etc...

And with a big correction inflation / lending rates would likely much higher.

Yeah the 'correction' in reality would cause significant damage to the UK's economy and deter investment.

Its a complicated mess. Combine this with the UK's demographic time bomb and it becomes even more grim.

So...almost everyone wouldn't welcome it.

Really.

....I would say most owner occupier homes have more than 50% equity gained over the last few years so a correction will only put them back into the position they were five or ten years ago....no big hardship....they should still be well in pocket paying less than 3% interest over that period so low cost debt means they are quids in, repaying debt, creating equity....not that many people in this country own more than one leveraged home the home they live in......those that borrowed the equity to spend know the risks, the lenders that lent it know the risks.....falling prices would pull back on reckless lending and encourage saving......using rising property prices, hpi to justify growth in the economy is an illusion.....manufactured fictionalisation of homes is like papering over the cracks in the economy.  ;)

Link to post
Share on other sites
40 minutes ago, winkie said:

....I would say most owner occupier homes have more than 50% equity gained over the last few years so a correction will only put them back into the position they were five or ten years ago....no big hardship...

Will f**k them that pklanned to use their house as their pension....and ANYONE that is levered up and cant afford to cover any shortfall.

NMP

 

Link to post
Share on other sites
17 hours ago, adarmo said:

If it was 1976 and I'd just taken out my mortgage then by 1979 It would be around 15% less in real terms and take up a lesser chunk of my take home. 

Yes.  I was a buyer in 1975 and after a few years what had seemed like a big debt didn't seem so bad.  Our first house was a slum and cost approx £5K but was hell to live in and try to do up without any spare cash (such was the idealism of youth.....we were all naive hippy boomers and had no idea about such things as finance).  HPI was rampant and we sold after 2.5 years for £8K (it was no longer a slum).  The house we bought in 1980 was £18K and the mortgage was around £150pcm which seemed a lot at the time and was certainly the highest monthly bill. It was sold in 1994 for £95K and thereafter rose rapidly.  It would be worth £400K+ today.  This was a 3 storey 4 bed Victorian terrace (money pit) in Cardiff.

Link to post
Share on other sites
On 7/10/2017 at 9:42 AM, HairyOb1 said:

I can see TPTB not waiving HTB money too, which will be outrageous - Imagine the political fall out from, effectively, giving 40% to London homeowners and 20% to others if there was a huge crash  Will make the bung given to the DUP look like chicken feed.

HTB is essentially a non recourse loan obviously the punters deposit/equity goes first  after that the taxpayer payer are on the hook for the rest if the government allows them to sell but if your deposit has gone you just hand the keys back if you are that way inclined 

Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
  • Recently Browsing   0 members

    No registered users viewing this page.

  • 429 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%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.