Is a price crash/ major correction coming

[G Down]

Hi all, just wanted to get the general consensus out there... What is going on with the prices?? Ex council houses a few miles outside Newry are going for 160k, newish 3 build semis are going for 190k in South Armagh, it's madness to me, is this sustainable? When do you think a price crash/ correction will occur? Is it possible that these price increases will continue, I see no real long term reasons for this madness to continue, please correct me if I'm wrong, just looking some insight, thanks

[JoeDavola]

It does feel like 2006 again to me.

Arguably even more ridiculous, since a big chunk of the economy wasn't shut down in 2006.

But as for price drops, I have no faith any more that will happen. I no longer expect the economy to follow anything resembling logic.

[G Down]

Thanks Joe Davola, it's complete madness to me, going to sit this out before buying at these prices. Hopefully prices will have stabilised or even slightly fallen hopefully...

[JoeDavola]

I can't advise you either way I'm afraid - are you having to pay much rent at the moment?

One idea might be to give it 6 months to a year to see how the economy bounces back from the furlough ending, if indeed it does.

As I say though your guess is as good as mine regarding what will actually happen. And the most important thing is that you can afford any house you do buy (even with the admittidly unlikely possibility of interest rate hikes), and that you are happy to live there in the long term.

If you are a single person without kids, then de-clutter so that you might be happier in a smaller house, perhaps in an area that you like more, and thus have to take on less debt.

[BelfastVI]

Always to give advice on this matter as I have a vested Interest.

Despite that I am always nervous when prices rise fast as if it keeps going there is only one outcome. However, the cost increases we are seeing in the industry are eyewatering (from 10% on some materials to 40%. I have never experienced anything like it. is hyper inflation here?

that only impacts the new-build market and we make up less than 20% of the market but the newbuild market will be forced up in price.

[2buyornot2buy]

44 minutes ago, BelfastVI said:

Always to give advice on this matter as I have a vested Interest.

Despite that I am always nervous when prices rise fast as if it keeps going there is only one outcome. However, the cost increases we are seeing in the industry are eyewatering (from 10% on some materials to 40%. I have never experienced anything like it. is hyper inflation here?

that only impacts the new-build market and we make up less than 20% of the market but the newbuild market will be forced up in price.

I see what you're saying BVI and yet official inflation is at 0.4%... Something does not compute. 

Personally, and I have a vested interest also in that I have a house, I think I'd step back from the foreseeable. The market looks completely irrational, absolutely booming in fact. What follows a boom? We should all know the answer here on the NI board. 

 

[JoeDavola]

1 hour ago, BelfastVI said:

Always to give advice on this matter as I have a vested Interest.

Despite that I am always nervous when prices rise fast as if it keeps going there is only one outcome. However, the cost increases we are seeing in the industry are eyewatering (from 10% on some materials to 40%. I have never experienced anything like it. is hyper inflation here?

that only impacts the new-build market and we make up less than 20% of the market but the newbuild market will be forced up in price.

It must also, albeit to a lesser extent, impact the cost of renovating a house?

I'm referring to the abundance of houses on the market that need a lot done to them yet the seller's still asking top dollar.

[JoeDavola]

It's garbage like this makes me think we must be in for a correction:

https://www.propertypal.com/31-blenheim-drive-east-belfast-belfast/687775

2 bed semi, no garage, virtually no garden, needs renovated....185K.

This would have been 130K a year or two ago.

[zamo]

Not if the Government can stop it.

4 x joint mortgages is pretty standard.

95% mortgages start this week....

Very average salary of £25k each gets you 200k purchasing power.

I like to compare houses to their 2005 lpsni value.

I feel that if it's roughly the same as 16 years ago then it is reasonable value.

3 Blenheim drive above was 125k rateable value in 2005.

[2buyornot2buy]

1 hour ago, zamo said:

Not if the Government can stop it.

4 x joint mortgages is pretty standard.

95% mortgages start this week....

Very average salary of £25k each gets you 200k purchasing power.

I like to compare houses to their 2005 lpsni value.

I feel that if it's roughly the same as 16 years ago then it is reasonable value.

3 Blenheim drive above was 125k rateable value in 2005.

Hsbc, probably the most conservative bank for residential lending will give me 5 times joint salary. That, to me, is absolutely bonkers lending. 

[JoeDavola]

19 minutes ago, 2buyornot2buy said:

Hsbc, probably the most conservative bank for residential lending will give me 5 times joint salary. That, to me, is absolutely bonkers lending. 

Do we know how long people are taking these huge mortgages out for?

Has 30+ years become the new norm?

[G Down]

Thanks so much to all for your input, I own a home with mortgage .. wife and 2 young kids, wife is looking to move to a new/ newish detached house with nice garden etc, I appreciate that raw materials have increased etc. but can't justify paying prices that houses are currently especially new builds that generally tend to be small houses with box gardens , in my humble opinion it's madness, approx, 2years ago I would have been able to get a good house for 215k, ( max budget I'd be comfortable with) today same houses wd cost over 290k, I'm just going to sit this out and visit the market again in 6 months, hoping a correction has occured, then again prices could keep on rising for some daft reason.

[2buyornot2buy]

14 hours ago, JoeDavola said:

Do we know how long people are taking these huge mortgages out for?

Has 30+ years become the new norm?

The BOE do produce the stats and I think they're available at regional level. From memory it was around 2.5% >30 years in the early 2000's to around 30% now. About a 1000% increase. 

Today's house buying will be retiring at 70 on a pittance but why would the current crop of politicians care. They'll be dead. 

[BelfastVI]

19 hours ago, zamo said:

Not if the Government can stop it.

4 x joint mortgages is pretty standard.

95% mortgages start this week....

Very average salary of £25k each gets you 200k purchasing power.

I like to compare houses to their 2005 lpsni value.

I feel that if it's roughly the same as 16 years ago then it is reasonable value.

3 Blenheim drive above was 125k rateable value in 2005.

The last time the banks fueled the boom by dishing out the money 100%, 105% no questions asked with self certified income reports.

Its no where near that now.

[BelfastVI]

18 hours ago, JoeDavola said:

Do we know how long people are taking these huge mortgages out for?

Has 30+ years become the new norm?

20 to 25 years still the norm and must be repayment

[BelfastVI]

16 hours ago, G Down said:

Thanks so much to all for your input, I own a home with mortgage .. wife and 2 young kids, wife is looking to move to a new/ newish detached house with nice garden etc, I appreciate that raw materials have increased etc. but can't justify paying prices that houses are currently especially new builds that generally tend to be small houses with box gardens , in my humble opinion it's madness, approx, 2years ago I would have been able to get a good house for 215k, ( max budget I'd be comfortable with) today same houses wd cost over 290k, I'm just going to sit this out and visit the market again in 6 months, hoping a correction has occured, then again prices could keep on rising for some daft reason.

not trying to encourage you but you will equally be getting more for the sale of your own house now. It is the overall increase in debt as a result of the move that you will have to look at. Same applies if house prices start to fall-yours goes down too. whilst the gap to move up may decrease banks retract into their shell.

[BelfastVI]

4 hours ago, 2buyornot2buy said:

The BOE do produce the stats and I think they're available at regional level. From memory it was around 2.5% >30 years in the early 2000's to around 30% now. About a 1000% increase. 

Today's house buying will be retiring at 70 on a pittance but why would the current crop of politicians care. They'll be dead. 

the only thing local politicians can do is zone more land to increase the supply of new housing but there are no votes in that.

[JoeDavola]

44 minutes ago, BelfastVI said:

20 to 25 years still the norm and must be repayment

If you take 20 years then @ 2% on a £180K mortgage (20% depost on a £200K house - £200K not buying you too much these days) that's £910 a month according to an online calculator. Add rates, upkeep ect...there must be quite a few couples where one wage basically all goes on paying for and maintaining the house?

Again I might just be a bit out of touch with the amount of money the average couple can throw at their house every month. Most single people aren't really in a position to buy one of these £200K houses that's for sure.

[JoeDavola]

In addition, it would seem to be that if the average couple say 30 years old is paying that for a very normal house that would often be considered a starter home or one rung up at most, the concept of a 'housing ladder' is gone unless we have major wage inflation over the coming 10 or 20 years.

[JoeDavola]

4 hours ago, 2buyornot2buy said:

The BOE do produce the stats and I think they're available at regional level. From memory it was around 2.5% >30 years in the early 2000's to around 30% now. About a 1000% increase. 

Today's house buying will be retiring at 70 on a pittance but why would the current crop of politicians care. They'll be dead. 

I know quite a few people well into their 30's and getting toward 40 who never bought a house, and at these prices I think they'll be renters for life.

[satsuma]

I would not worry about it too much, houses will never be high in NI, you can always be sure that the local politicians care not about the economy.  With no base of increasing wealth its always going to go bang every few years.  When I say bang I mean crash, bang wallop-50% drop.  

[2buyornot2buy]

2 hours ago, BelfastVI said:

20 to 25 years still the norm and must be repayment

Majority of terms are 25 years but the average term is closer to 30 than 20 years. 

[2buyornot2buy]

1 hour ago, satsuma said:

I would not worry about it too much, houses will never be high in NI, you can always be sure that the local politicians care not about the economy.  With no base of increasing wealth its always going to go bang every few years.  When I say bang I mean crash, bang wallop-50% drop.  

No strategic thinking whatsoever. I found out yesterday I can get 50k for doing nothing more than fill a 2 page application form care of the folks on the Hill. They are continuing to throw money about with the splatter gun. 50k for absolutely nothing. 

[2buyornot2buy]

1 hour ago, JoeDavola said:

I know quite a few people well into their 30's and getting toward 40 who never bought a house, and at these prices I think they'll be renters for life.

Average age to buy here has been over 30 for years. Most mortgages will run to near retirement. When rates are the lowest in history. 15 years since the last crash and rates are where they are. Tells you everything you need to know. 

[2buyornot2buy]

2 hours ago, BelfastVI said:

the only thing local politicians can do is zone more land to increase the supply of new housing but there are no votes in that.

Prices aren't set by supply and demand. At least not physical supply. It's credit. Ireland circa 2008 taught us that. Remove mortgages and prices would drop like a stone. 

Edited April 22, 2021 by 2buyornot2buy