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House Price Crash Forum

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I have dipped in and out of this website for over 15 years now and not much has changed.    The logic behind a house price crash is sound, it is just the lengths the government will go to avoid this were not appreciated.

Here we are, in the middle of a global pandemic,  hundreds of thousands of jobs have been lost, 25K jobs lost today alone with Arcadia and Debenhams, Brexit in under 5 weeks and......

House prices increasing at their highest rate in six years.

For those that still hold the faith it is coming, what exactly do you think will be the trigger?

 

Yes. Plus each yearly rise will require an even larger drop in future to bring affordability back.

"Timing the market" doesn't work. People just need to act when their personal situation favours buying.

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I have dipped in and out of this website for over 15 years now and not much has changed.    The logic behind a house price crash is sound, it is just the lengths the government will go to avoid this were not appreciated.

Here we are, in the middle of a global pandemic,  hundreds of thousands of jobs have been lost, 25K jobs lost today alone with Arcadia and Debenhams, Brexit in under 5 weeks and......

House prices increasing at their highest rate in six years.

For those that still hold the faith it is coming, what exactly do you think will be the trigger?

 

The horsemen of the apocalypse. 

It's clear that the only way you will get a HPC is to move your hard-earned GBP into some other asset class. If only there was an answer pinned somewhere prominently. 

Edited by MonsieurCopperCrutch
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I have dipped in and out of this website for over 15 years now and not much has changed.    The logic behind a house price crash is sound, it is just the lengths the government will go to avoid this were not appreciated.

Here we are, in the middle of a global pandemic,  hundreds of thousands of jobs have been lost, 25K jobs lost today alone with Arcadia and Debenhams, Brexit in under 5 weeks and......

House prices increasing at their highest rate in six years.

For those that still hold the faith it is coming, what exactly do you think will be the trigger?

 

Very salient points.

I think what's different in this current economic crisis is that the props have been rushed out in advance of perceived house price falls. In the aftermath of 2008, authorities acted in response to prices that were already falling. Will that mean that this time prices don't even dip nominally, or that the ammunition eventually runs out and a fall comes later on?

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The Telegraph said that Treasury advisors were of the mind to extend the SD holiday due to the carnage of chain collapses all over the place. What I can see is a different situation where Sunak says that all transactions with contracts exchanged by say the end February will be exempt of SD provided they complete by say the end of May. Fixing dates and insuring that there is no doubt about the SD tax break would be fairer than the lottery that people are going into now with surveyors and solicitors at peak capacity, and more acceptable to those who hate this SD holiday than extending it for another year.

Why do you hate the SD holiday? Stamp duty is a drag on transactions and prevents price discovery. Getting rid of stamp duty would be a good thing.

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Very salient points.

I think what's different in this current economic crisis is that the props have been rushed out in advance of perceived house price falls. In the aftermath of 2008, authorities acted in response to prices that were already falling. Will that mean that this time prices don't even dip nominally, or that the ammunition eventually runs out and a fall comes later on?

I do think there are two factors that may explain the recent house price increases that have little to do directly with government actions, which may have meant house prices would have increased even without the stamp duty cut, though probably not as much.

First the lockdowns and travel restrictions meant people could spend their money on less things. If they spend less on stuff that has not really been feasible this year such as that £2000 yearly holiday they could save more money and so build up a bigger housing deposit than they would have otherwise. 

Second, the lockdowns have meant many people believe in the future they will be spending more time at the home than they would have done previously. Like many other products, the more you think you are going to use it, the more you are likely to want to spend on it, hence buyers will try and stretch their budgets a bit more when it comes to homes.

 

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Lots of sensible posts and points above.

I'd add that although it looks like the housing market has been impervious to the economic bad news, it won't be totally insulated from it. It's not a hermetically sealed entity. For those on the sharp end, savings are dwindling / debts rising, mortgage holidays ending, redundancies imminent, etc. 

Again, when was the last time we had a significant recession and house prices didn't fall?

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Why do you hate the SD holiday? Stamp duty is a drag on transactions and prevents price discovery. Getting rid of stamp duty would be a good thing.

I'm against it because the Land Registry's services have to be paid for somehow and I haven't seen much evidence that SD is an economic drag.

Housing is essential and so demand is essentially infinite. In this situation the limiting factors are generally debt availability and price. If you remove stamp duty then all you really do is free up some more money for the price part of the equation, which of course leads to a rise in price. As high prices impede transactions you might even argue the removal of SD might in the long run act as a drag itself.

 

Second, the lockdowns have meant many people believe in the future they will be spending more time at the home than they would have done previously. Like many other products, the more you think you are going to use it, the more you are likely to want to spend on it, hence buyers will try and stretch their budgets a bit more when it comes to homes.

It don't think it's done that. What I think it has done is made people re-assess the kind of place they want. And in that regard properties with large gardens seem to have seen an uptick.

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I'm against it because the Land Registry's services have to be paid for somehow and I haven't seen much evidence that SD is an economic drag.

What evidence did you look for?

 

Housing is essential and so demand is essentially infinite. In this situation the limiting factors are generally debt availability and price. If you remove stamp duty then all you really do is free up some more money for the price part of the equation, which of course leads to a rise in price. As high prices impede transactions you might even argue the removal of SD might in the long run act as a drag itself.

Illiquid markets are worse for price discovery. Since people have to stump up the stamp duty anyway the cost will essentially be the same, so that isn't an argument.

Stamp duty is a transaction tax on moving. It will prevent people from moving. We shouldn't prevent people from moving, we should allow them to do it as frequently as they like.

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What evidence did you look for?

That provided by those who (often repeatedly) push that argument.

 

Stamp duty is a transaction tax on moving. It will prevent people from moving. We shouldn't prevent people from moving, we should allow them to do it as frequently as they like.

Show me longitudinal evidence that having to pay stamp duty negatively impacts transactions.

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Show me longitudinal evidence that having to pay stamp duty negatively impacts transactions.

I do this while gritting my teeth because I know someone who holds a view as absurd as yours (contradicts standard economics) isn't going to change their mind. So normally I'd just wave you on your merry way and you can continue to believe what you choose to believe.

But anyway:

https://esrc.ukri.org/news-events-and-publications/evidence-briefings/stamp-duty-impact-on-the-housing-market/

The findings strongly suggest that stamp duty slows down the housing market by preventing households from moving to more suitable homes. There is a visible reduction in the rate of mobility when house values exceed £250,000 and trigger the increase in tax rate from 1% to 3%. Estimates suggest that the increase of two percentage points in stamp duty reduces household mobility by almost 40%.

https://www.lse.ac.uk/business-and-consultancy/consulting/assets/documents/is-stamp-duty-land-tax-suffocating-the-english-housing-market.pdf

The evidence makes it clear that SDLT has become a more important factor in buyers’ decisions over the last ten years. This is not surprising: SDLT paid by buyers of median- value homes has risen markedly over the last decade in absolute terms and as a proportion of average earnings (although the 2014 slab-to-slice reforms mitigated the rise, at least temporarily), while SDLT on purchases of more expensive homes has gone up very sharply. Tighter mortgage conditions in the wake of the GFC also mean that the tax must be paid up- front out of savings, rather than funded by a loan.

And i'm sure you can do your own research on the basic fundamental of economics that taxing an activity is a means to discourage said activity. Good luck.

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"Psychological barriers to moving are high—it’s costly and it’s hard to build up new
friendship groups. It’s a difficult decision for anyone to make—so perhaps SDLT is
just the final barrier that keeps people in their homes." Academic

[...]

 

"Finally, SDLT appears to deter discretionary moves more than necessary moves
(for job reasons or moving into care) (Hilber & Lyytikäinen 2017; IPC 2016). However
discretionary moves make up the majority of normal housing transactions."

OK, fair enough.

Edited by LandOfConfusion
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Rejoice...rumour is Halifax is bringing back 90% LTV mortgages next week.  Maximum multiple of x4.5 and 'enhanced credit score' required.

Those of you waiting for the crash, you cannot win.   No matter how much cash you are sitting on the government are devaluing it day by day.    They will go to any length to ensure house prices don't fall, and every time they do this your saved money as a percentage of a house gets smaller and smaller.

While you are sitting on your money, terrified to buy there are endless people out there buying property with borrowed money without a care in the world.

Compare a random person who happened to buy a house in the last 15 years with someone who rented and diligently saved instead.  Who is better off?

I am choosing to ignore the average HPC'er who obviously put their money into Crypto at exactly the right time and are sitting on a couple of houses worth.

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Two parts to house prices.....first: the deposit, unencumbered money clear of debt.

Second: borrowed debt principle and interest......over the years the interest paid has been replaced by a higher principle of debt required, fairly balanced over the term of the debt taking into account inflation......we have now reached the tipping point where interest is as low as can go without going negative.......so the only thing that has go up is the deposit........the deposit, the sheer sum required if saved (earning no interest) will be the catalyst of depreciating house prices.

Without gifted money from sale or leverage of existing equity, many more will be  excluded from the property market entirely........until the point tips as unsustainable.;)   

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I think prices are down at least 5% in Scotland but the figures are skewed by the type or property being sold. It’s abundantly clear that where I live there are far fewer smaller flats on the market, while at the same time which a lot of larger, dare I say it more prestigious houses have come onto the market. I think a lot of older people are wise to what’s happening and have cashed out now by down sizing. 

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I think prices are down at least 5% in Scotland but the figures are skewed by the type or property being sold. It’s abundantly clear that where I live there are far fewer smaller flats on the market, while at the same time which a lot of larger, dare I say it more prestigious houses have come onto the market. I think a lot of older people are wise to what’s happening and have cashed out now by down sizing. 

The demographics of people looking to downsize is a growing number of people.....very many reasons why they would want to downsize.....asset rich, cash poor? too old to look after the garden, do the DIY/maintenance, kids grown up, lots of empty bedrooms to clean, high CT, heating, water costs etc......far too big and expensive, not worth the inconvenience and hassle, big costly tie......life too short.

 

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