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No silver lining for first-time home buyers even if prices collapse


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https://www.theguardian.com/money/2020/aug/13/no-silver-lining-for-first-time-home-buyers-even-if-prices-collapse

Warning that the pandemic would deepen pre-existing inequalities and exacerbate growing generational divisions, the thinktank said only those who already had high levels of savings before the Covid recession struck would stand to benefit.

 

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9 minutes ago, PeanutButter said:

Warning that the pandemic would deepen pre-existing inequalities and exacerbate growing generational divisions

Why couldn't they have pictures/videos of greedy disgusting landlords using the SDLT opportunity to take on yet more property? We know they're out there gobbling up as many standard FTP properties as they can get their fat fingers on. 

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Says 21% price 'crash'.  I don't see 21% as a price crash by any means, if prices still don't drop to less that what is affordable for new buyers in particular or those wanting to move from a 1 bed flat to a house then it is a small blip down, added to that article then states prices rising again.  So even to the writers of that article, 10x a local wage for a low end house is OK and normal.   A crash would, considering current interest rates knock that back to 3 or 4 x  local median wages wherever you are, ie  a 60% drop. 8x a wage is still far from affordable.  Lets hope the banks see it that way too once they catch a case of foreclosure diarrhea.

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1 minute ago, sammersmith said:

Why couldn't they have pictures/videos of greedy disgusting landlords using the SDLT opportunity to take on yet more property? We know they're out there gobbling up as many standard FTP properties as they can get their fat fingers on. 

That'll be in the Daily Mail/Express which is where landlord parasites hang out.

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Funny how this is the top story on the BBC website as well - bullish for the housing market.

The average FTB deposit was £46,000. By definition they do have savings and as such will benefit from falling prices.

Those right at the bottom reliant on 95% mortgages will not - but they must be a minority. But it seems nobody minds conflating it all totgether.

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30 minutes ago, sammersmith said:

Why couldn't they have pictures/videos of greedy disgusting landlords using the SDLT opportunity to take on yet more property? We know they're out there gobbling up as many standard FTP properties as they can get their fat fingers on. 

Are they? 

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27 minutes ago, Staffsknot said:

I think it is a standard - you won't benefit if house price falls happen puff piece that appears whenever there is a chance of people benefitting from said falls. A please don't wait just believe us piece...

Nail on the head.

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40 minutes ago, Staffsknot said:

I think it is a standard - you won't benefit if house price falls happen puff piece that appears whenever there is a chance of people benefitting from said falls. A please don't wait just believe us piece...

Yes.

This is why house prices fall. Because something happens and people can't afford them anymore. It's a tautology. It's always like this.

But who's you rather be, someone scraping together savings and income is a recession to buy a cheap house. Or in enormous negative equity and on a much lower income then before having bought when they were expensive.

Edited by Si1
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40 minutes ago, steve99 said:

Says 21% price 'crash'.  I don't see 21% as a price crash by any means, if prices still don't drop to less that what is affordable for new buyers in particular or those wanting to move from a 1 bed flat to a house then it is a small blip down, added to that article then states prices rising again.  So even to the writers of that article, 10x a local wage for a low end house is OK and normal.   A crash would, considering current interest rates knock that back to 3 or 4 x  local median wages wherever you are, ie  a 60% drop. 8x a wage is still far from affordable.  Lets hope the banks see it that way too once they catch a case of foreclosure diarrhea.

You're still working on the basis of a single income being able to buy a house, which is not how this game is played anymore. 

You're also working on the basis that "average" is what people earn, which again is a misnomer. Your average millennial homeowning couple these days is either two professional wages or one professional/trades salary and one 3 day a week supplement. In provincial areas, commuting is very common therefore "local" wage means nothing.

You're also assuming an average house price is what people pay which, again, is a misnomer. Take a look at my area;

I would guess the average local wage is about £25k for blokes £15 - £20k for women, but let's call it £20k for simplicity. House prices are roughly £180k to £200k on average (depending on who you believe) so around 10 times a single wage but closer to the magic 4.5 times a joint income. 

A 20% drop would put your average at £145k - £160k. Assuming a 10% deposit approximately you're going to be borrowing between £130k and £145k on a household income of £40k, less than 4* income. With low interest rates and room to grow career wise, that's really not too bad. 

Problem is, "average" price is nonsense. Average for what? In practise our hypothetical young couple will get either a serious fixer upper or a half decent house in a crap area for their hypothetical average house price and will need to take on more debt in future unless their expectations are low or they are able to affordably renovate the property. The real change in house prices will come when young couples are able to buy a "forever" home right off the bat. 

One interesting dynamic is the move to WFH for professionals. Now it's possible to have a city wage that doesn't require you to cram into the expensive neighbourhood near the station or accept a massive commute. This could be a game changer for the housing market as it opens up areas to provincial commuters like me that we wouldn't have looked at before but also potentially relieves pressure in hot spots. I'm already trying to persuade the wife we should sell up and look further north where our money will stretch a lot further when my required office time is once a week if that. 

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59 minutes ago, sammersmith said:

Why couldn't they have pictures/videos of greedy disgusting landlords using the SDLT opportunity to take on yet more property? We know they're out there gobbling up as many standard FTP properties as they can get their fat fingers on. 

It's very depressing, I have just been looking in an area I keep an eye on rents and prices, this landlord is setting a new precedent with this £1000 PCM for a 2 bed. https://www.rightmove.co.uk/property-to-rent/property-83406406.html

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7 minutes ago, 12fixer said:

It's very depressing, I have just been looking in an area I keep an eye on rents and prices, this landlord is setting a new precedent with this £1000 PCM for a 2 bed. https://www.rightmove.co.uk/property-to-rent/property-83406406.html

There's got to be a sting to this for LL. Perhaps the CGT changes in March or S24 taper fully. They surely can't come out of this crisis without a beating. Maybe the SDLT was just about getting them nice and fat ready for slaughter. 

Edited by sammersmith
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14 minutes ago, sammersmith said:

They always are. What else can they do with their lives?

Here's one who's overjoyed with cut. 

 

The article said FTB outside of London who already had stamp duty removed now had to compete with everyone gaining the same advantage, so the headline seems somewhat accurate to me. 

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12 minutes ago, sammersmith said:

There's got to be a sting to this for LL. Perhaps the CGT changes in March or S24 taper fully. They surely can't come out of this crisis without a beating. Maybe the SDLT was just about getting them nice and fat ready for slaughter. 

How many MPs are landlords? There’s your answer.

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24 minutes ago, Hullabaloo82 said:

You're still working on the basis of a single income being able to buy a house, which is not how this game is played anymore. 

You're also working on the basis that "average" is what people earn, which again is a misnomer. Your average millennial homeowning couple these days is either two professional wages or one professional/trades salary and one 3 day a week supplement. In provincial areas, commuting is very common therefore "local" wage means nothing.

You're also assuming an average house price is what people pay which, again, is a misnomer. Take a look at my area;

I would guess the average local wage is about £25k for blokes £15 - £20k for women, but let's call it £20k for simplicity. House prices are roughly £180k to £200k on average (depending on who you believe) so around 10 times a single wage but closer to the magic 4.5 times a joint income. 

A 20% drop would put your average at £145k - £160k. Assuming a 10% deposit approximately you're going to be borrowing between £130k and £145k on a household income of £40k, less than 4* income. With low interest rates and room to grow career wise, that's really not too bad. 

Problem is, "average" price is nonsense. Average for what? In practise our hypothetical young couple will get either a serious fixer upper or a half decent house in a crap area for their hypothetical average house price and will need to take on more debt in future unless their expectations are low or they are able to affordably renovate the property. The real change in house prices will come when young couples are able to buy a "forever" home right off the bat. 

One interesting dynamic is the move to WFH for professionals. Now it's possible to have a city wage that doesn't require you to cram into the expensive neighbourhood near the station or accept a massive commute. This could be a game changer for the housing market as it opens up areas to provincial commuters like me that we wouldn't have looked at before but also potentially relieves pressure in hot spots. I'm already trying to persuade the wife we should sell up and look further north where our money will stretch a lot further when my required office time is once a week if that. 

Im assuming median wages and median house prices for an area (as in a potential commuting area, not the local village), or slightly less than median house prices for first time buyers. Considering that even under your scenarios which looks good on paper and has been accurate for the last 15 years or so,  however I'm now taking into account the effects of the looming recession, when job furlough ceases and lots of 2 income couples find themselves to be 1 or zero income couples as happened to many people in the 90's then your 20% drop will not match the finances and confidence of new buyers, nor the banks lending largess.   ie 20% will not be a relative crash.  A new paradigm will become apparent that is very changed from the last few years.

Also to note that London and that SE corner has far exceeded affordability by any measure and nothing less than 50% would put it back anywhere near affordability for many well employed couples doing real professions, never mind the pretend professions that used to be just normal white collar admin jobs.

Another thing to note, many people who see themselves as professional and middle class may well find themselves to be unemployed and/or working class after all when their wages and prospects get redefined cause lets face it, traditionally middle class people were extremely resilient with lots of family money and connections to keep them more than financially resilient and well housed. Not the majority today.

 

As well as that, 2 incomes have been normal for buying houses since the 1980's or longer as my parents needed two incomes also so no, Im not assuming 1 income. It is also part of bubble thinking that it should require 2 incomes to keep even 1 person housed, ie ring-fencing out a good proportion of the population. 

Edited by steve99
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25 minutes ago, Hullabaloo82 said:

One interesting dynamic is the move to WFH for professionals. Now it's possible to have a city wage that doesn't require you to cram into the expensive neighbourhood near the station or accept a massive commute. This could be a game changer for the housing market as it opens up areas to provincial commuters like me that we wouldn't have looked at before but also potentially relieves pressure in hot spots. I'm already trying to persuade the wife we should sell up and look further north where our money will stretch a lot further when my required office time is once a week if that. 

Give it time, we're already seeing the more switched on employers knocking wages down due to dispersion effects.  

Why pay city rates if you don't have city living costs?

Facebook for example have announced next year to revise one's income based on their location (remote location) as opposed to their HQ.  Others will follow suit as a way to control costs.

Having said that, I actually think everyone will be better off in this equation, even with salary cuts.

Edited by blackhole
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14 minutes ago, sammersmith said:

There's got to be a sting to this for LL. Perhaps the CGT changes in March or S24 taper fully. They surely can't come out of this crisis without a beating. Maybe the SDLT was just about getting them nice and fat ready for slaughter. 

I'm waiting for the day all landlords who bought in personal name then transferred to LTD company, got hit with sdlt and CGT, to avoid the reduction of interest relief taxation, and who are all on io mortgages, to find that in the budget of 2021 the government suddenly decided to remove the interest relief for ltd companies too...

I will laugh my ruddy socks off, sheep herded but the government towards the pen only to find it's not a pen but a giant mince meat machine, similar to the pink Floyd brick in the wall video with the school kids.

Mince meat @ 1:53

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20 minutes ago, PeanutButter said:

The article said FTB outside of London who already had stamp duty removed now had to compete with everyone gaining the same advantage, so the headline seems somewhat accurate to me. 

It's accurate, but it does not specifically target landlords. Interestingly, the BBC article of the same report does single out landlords as in competition with FTBs. 

https://www.bbc.co.uk/news/business-53755590

Quote

The Resolution Foundation has called for targeted government support for first-time buyers to support their incomes, or give them some kind of advantage over homeowners and landlords when trying to buy a property.

Maybe the Guardian doesn't want to upset its BTL Labour luvvies readership. 

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2 hours ago, steve99 said:

That'll be in the Daily Mail/Express which is where landlord parasites hang out.

any statistical evidence for the number and status of property ownership of those who read different newspapers? 

24 minutes ago, sammersmith said:

Maybe the Guardian doesn't want to upset its BTL Labour luvvies readership. 

OMG do not be rude about the Guardian you will be accused of being a racist or  some form of hitherto unthaught of discrimination or some other heinous offence that will offend them 

 

 

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53 minutes ago, blackhole said:

Give it time, we're already seeing the more switched on employers knocking wages down due to dispersion effects.  

Why pay city rates if you don't have city living costs?

Facebook for example have announced next year to revise one's income based on their location (remote location) as opposed to their HQ.  Others will follow suit as a way to control costs.

Having said that, I actually think everyone will be better off in this equation, even with salary cuts.

I think people over estimate how common this will be. Putting London to one side for the moment, a lot of professional services roles in provincial cities are already experiencing skills shortages as EU and other international staff quit London, US/Australians don't bother anymore due to comparative poverty pay and London starts to dip into the local talent pool. 

From my perspective, my role is extremely UK specific (and not really vulnerable to brexit or covid but won't be too specific as don't want to doxx), we've outsourced and commodified as much as we can safely do already and we still don't have enough staff. Increased regulatory requirements pretty much cancel out any automation or outsourcing gains we get. I work for one massive brand name firm but it's interchangeable with at least another 5 or 6. 

I don't see how pay can go down right now. The best they can do at the moment is freeze and maybe use permanent WFH as a sweetener, otherwise contracting or jumping ship beckons for a lot of staff. Despite the hype, there's plenty of jobs in a similar state at the moment. 

Regarding London based firms, how representative of the wider world is Facebook as an employer? If your wage went from "enormous but doesn't count for shit in London" to "20% less which gets you a palace in Wales" would you care? 

I'm contemplating an "HQ" job in London when the dust settles. I doubt I'll get the full London weighting but if they'll meet me half way and pay my fortnightly train fare I won't care. 

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14 minutes ago, richmondtw said:

any statistical evidence for the number and status of property ownership of those who read different newspapers? 

OMG do not be rude about the Guardian you will be accused of being a racist or  some form of hitherto unthaught of discrimination or some other heinous offence that will offend them 

 

 

No, just an educated guess. I know two BTL landlords and they  only read the DM. So does my mother in law and her brother (both over 80)  What amazes me is that they all voted brexit and trot out the same issues as each other as if a learned script about  Corbyn,  brexit and 'swarmed by refugees' on a regular basis. They both think the BBC and the Guardian are  Marxist outfits (also a learned opinion) but at the same time watch the BBC,  and that Boris is doing a great job under the circumstances.  The oldest landlord who runs a HMO in outer London has s**t in his own boots with his Brexit vote on account of half his tenants for the last 20 years were Eastern Europeans who are now evaporating and are now being replaced with South Asians and Africans who he hates even more than EU's and worse still, most of them were in low wage service jobs and have been layed off without furlough and are not paying rent.

As for the Guardian, its 70% good and 30% twaddle, on the other hand the DMail, Express is 50% vile vitriolic nastiness and 50% Celeb and royalty tripe. ie 0% good with no social conscience.  

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10 minutes ago, Hullabaloo82 said:

I think people over estimate how common this will be. Putting London to one side for the moment, a lot of professional services roles in provincial cities are already experiencing skills shortages as EU and other international staff quit London, US/Australians don't bother anymore due to comparative poverty pay and London starts to dip into the local talent pool. 

From my perspective, my role is extremely UK specific (and not really vulnerable to brexit or covid but won't be too specific as don't want to doxx), we've outsourced and commodified as much as we can safely do already and we still don't have enough staff. Increased regulatory requirements pretty much cancel out any automation or outsourcing gains we get. I work for one massive brand name firm but it's interchangeable with at least another 5 or 6. 

I don't see how pay can go down right now. The best they can do at the moment is freeze and maybe use permanent WFH as a sweetener, otherwise contracting or jumping ship beckons for a lot of staff. Despite the hype, there's plenty of jobs in a similar state at the moment. 

Regarding London based firms, how representative of the wider world is Facebook as an employer? If your wage went from "enormous but doesn't count for shit in London" to "20% less which gets you a palace in Wales" would you care? 

I'm contemplating an "HQ" job in London when the dust settles. I doubt I'll get the full London weighting but if they'll meet me half way and pay my fortnightly train fare I won't care. 

Well yes you're right there are certain high value niches that have shortages to this day, and hence the contracting route is available to them.  

But for most people this isnt really an option, they don't have that bartering power.  Nor do they often believe they as employees have much in the way of rights or collective power to be honest.  

Pay has been going down if not at great scale, its even been posted on this forum that those in financial services are taking a 10% hair cut already.  I've also seen contractors make the dash to perm roles in a bid for safety (which is certainly another form of paycut...!)

Bonuses have dramatically shrunken overnight; that's certainly a pay cut.

Even the golden sector of tech, there's a massive oversupply of testers and project managers swirling around.  

I think - and I actually understand - those in highly niche types (myself included) arent feeling the impact.  But that wont preclude others suffering this.

As for Facebook it does count - they're a massive employer across the globe who pay very high salaries across the board.  Tech firms often show upcoming trends.  

But yes you highlight my point exactly, if you took 20% less of your city wage but all of a sudden can afford a home in a good community with dramatic less travel, whilst the employer also gets better VFM.... it is better for everyone in reality.

Edited by blackhole
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  • 415 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%



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