House price crash

[70PC]

According to Rightmove, the average house price in Winchester is £617,771. Who buys the average house there and how do they pay back £27k a year over 25 years plus mortgage interest?

Is wage inflation the answer? Apparently it is not that simple now.

At 0% mortgage interest, house prices can go to infinity. We are not far from those rates now. People have short memories.

[FallingAwake]

Imagine the screaming if / when interest rates ever return to "normal". Then again, I'm not sure they ever will, unless inflation gets really out of hand.

[fuzzy_bear]

Just now, FallingAwake said:

Imagine the screaming if / when interest rates ever return to "normal". Then again, I'm not sure they ever will, unless inflation gets really out of hand.

There is no such thing as "normal" interest rates. They are what the wider economy needs them to be at any given time - believing otherwise has done immeasurable damage to many people's long-term financial well-being

[petetong]

It seems as though the old norms don't apply now though. Near zero or zero interest rates are here for the long term now, together with ever increasing demand due to various factors, so house prices are only going one way, and that ain't down. Absolute economic carnage would need to occur with mass repossessions for prices to drop significantly and can you see that happening ? 

[MarkD]

1 minute ago, FallingAwake said:

Imagine the screaming if / when interest rates ever return to "normal". Then again, I'm not sure they ever will, unless inflation gets really out of hand.

It’s unimaginable. ‘Normal’ rates at this point would be absolute carnage. It happened last in the early 90’s, long forgotten now, aside from those who lost their houses…….

[Dorkins]

1 hour ago, petetong said:

It seems as though the old norms don't apply now though. Near zero or zero interest rates are here for the long term now

But as the OP points out, if you completely ignore interest costs even the capital repayment is >£2k a month which is a lot of money even for fairly comfortable (gross income >£100k) households.

[markyh]

44 minutes ago, Dorkins said:

But as the OP points out, if you completely ignore interest costs even the capital repayment is >£2k a month which is a lot of money even for fairly comfortable (gross income >£100k) households.

Rubbish, you look at this in FTB terms, 90% of buyers will be trading up and transfer a big chunk of equity. As I have said many times since 2016, we bought a £501k house On a 20 year mortgage , on a £5k pcm net income, but put down a £200k deposit built up from 1996. So our mortgage payments are £1600, the remaining £3400 is more than the vast majority of the nation take home as a family in the first place. Everything is relative. They answer is the buyers in Winchester are considerably richer than yawl. 

[househunter123]

According to the guys at HSBC, everything is in place for prices to come down in a decade at the earliest. It does sound convincing this.

"Analysts at HSBC have such a long list of reasons for a prolonged period of property price growth there is barely space here to discuss them all."

 

https://www.theguardian.com/business/2021/aug/14/sorry-kids-house-prices-arent-going-to-stop-going-through-the-roof

 

 

[andrewwk]

33 minutes ago, househunter123 said:

According to the guys at HSBC, everything is in place for prices to come down in a decade at the earliest. It does sound convincing this.

"Analysts at HSBC have such a long list of reasons for a prolonged period of property price growth there is barely space here to discuss them all."

 

https://www.theguardian.com/business/2021/aug/14/sorry-kids-house-prices-arent-going-to-stop-going-through-the-roof

 

 

"Stock prices have reached what looks like a permanently high plateau"

Irving Fisher, economist, 1929

 

[Dorkins]

22 minutes ago, andrewwk said:

"Stock prices have reached what looks like a permanently high plateau"

Irving Fisher, economist, 1929

 

Yes, somebody claiming that house prices have another decade to run looks very much like the 1929 plateau claim or equivalent dotcom bubble foolishness.

[Si1]

6 hours ago, househunter123 said:

According to the guys at HSBC, everything is in place for prices to come down in a decade at the earliest. It does sound convincing this.

"Analysts at HSBC have such a long list of reasons for a prolonged period of property price growth there is barely space here to discuss them all."

 

https://www.theguardian.com/business/2021/aug/14/sorry-kids-house-prices-arent-going-to-stop-going-through-the-roof

 

 

Deep within that missive is his view that both employment and unemployment would support house prices.

Honestly it's sub-Express standard in its drivel:

"The next decade looks secure for those who venture into property ownership, be they first-time buyers, those wanting to swap a city-centre flat for somewhere more spacious in the suburbs or, more likely, over-55s who fancy adding to the family home with either a holiday bolthole or a mini rental empire."

(Honestly - bolthole?)

Inman has always come across as a lightweight. Larry Elliot and Victor Keegan have been far more worthwhile to read.

[14stFlyer]

7 hours ago, househunter123 said:

"Analysts at HSBC have such a long list of reasons for a prolonged period of property price growth there is barely space here to discuss them all."

Just one reason that they will go down: It’s a bubble.  And eventually they pop.
 

it does not take 12-14 man years of work and materials to make a house. And therefore houses are not intrinsically worth 12-14x  local salary.  

Edited August 15, 2021 by 14stFlyer

[locky82]

11 hours ago, petetong said:

It seems as though the old norms don't apply now though. Near zero or zero interest rates are here for the long term now, together with ever increasing demand due to various factors, so house prices are only going one way, and that ain't down. Absolute economic carnage would need to occur with mass repossessions for prices to drop significantly and can you see that happening ? 

Can absolutely see that happening within the next five years. Those who fail to learn from history are condemned to repeat it. 

[Si1]

11 hours ago, petetong said:

It seems as though the old norms don't apply now though. Near zero or zero interest rates are here for the long term now,

Evidence? Principles?

11 hours ago, petetong said:

 

together with ever increasing demand due to various factors 

Such as?

11 hours ago, petetong said:

 

 so house prices are only going one way, and that ain't down. Absolute economic carnage would need to occur with mass repossessions for prices to drop significantly 

Really?

11 hours ago, petetong said:

 

and can you see that happening ? 

??

[markyh]

1 hour ago, Si1 said:

or, more likely, over-55s who fancy adding to the family home with either a holiday bolthole or a mini rental empire."

(Honestly - bolthole?)

Just because you can’t imagine this lifestyle, there are still millions in the top 15% of incomes and wealth that do, we are seriously planning to buy a 2nd home in Cape Town SA when I retire in 15 years time, and the youngest kid is 22. It’s in our retirement plan to spend 6 months a year living in SA, and will most likely spend up to £250k on a “bolt hole” , and by then our UK house could be worth “£1m”

[Huggy]

Quick! Everybody buy before you miss out!

[Kosmin]

Some commentators have speculated that the bounceback from last year’s recession – the worst in 300 years – will be so strong the Bank will have to calm things by raising interest rates as early as next year.

Does Inman and/or the HSBC think prices will rise when interest rates rise?!

Moreover, says HSBC, we are seeing the emergence of another element of support for prices: and that it is the return of buy-to-let.

Demand for flats seems much lower than for houses. Flats are generally at least a little cheaper now than they were several years ago and they are taking a long time to sell.

If there were a return of buy to let, then why would demand for flats be so low? Or is it possible there is an increase in BTL demand, but this is outweighed by reduced demand from FTBs? 

[Pop321]

1 hour ago, Huggy said:

Quick! Everybody buy before you miss out!

😆

Reality is to be able to hedge and prepare for every eventuality, even if it is to prepare emotionally.

House prices ARE too high.

History suggests a fall will happen. 

However ‘new economics’ are at play and a concerted global effort by governments to stay in power another few years and suckle at the teat of power and wealth keep kicking the can.

Prices will normalise but whether that hits next week or 30 years time is the hardest part to predict.

Those who are certain prices are stable are following the millions before them who rest their pint on a wobbly shelf may end up with their drink in the floor.

Those who buy badly are risking a lifetime of financial misery. Those who don’t buy may miss out for a decade (although personally I doubt it)

The key is if you must buy then ignore the hype and buy well….wait for a couple of months of negative sentiment and get something that is suitable for you to live in for 20 years (as much as anyone can predict their circumstances) 

Negative sentiment was around us in November and December and saved 20% off daft summer 2020 prices. Things are booming again but just wait for some bad news…the market dips and rises.

Furlough news should create a sentiment dip…so some motivated sellers may emerge.

Houses are rocketed yet we have a whole thread dedicated to houses showing drops of 20% off asking prices…indeed some at 2005/6 levels.

Buying (for the financially savvy on these threads) should not about buying at average prices based on stats but watching locally and setting yourselves up well. Whilst in the meantime hoping for a normalisation of prices so the average person, on an average wage can buy an average house. 

Edited August 15, 2021 by Pop321

[highcontrast]

1 hour ago, markyh said:

and will most likely spend up to £250k on a “bolt hole” , and by then our UK house could be worth “£1m”

Is anyone else finding MarkyMarks posts as brilliantly amusing as me?

 

[Huggy]

6 minutes ago, Pop321 said:

😆

Reality is to be able to hedge and prepare for every eventuality, even if it is to prepare emotionally.

House prices ARE too high.

History suggests a fall will happen. 

However ‘new economics’ are at play and a concerted global effort by governments to stay in power another few years and suckle at the teat of power and wealth keep kicking the can.

Prices will normalise but whether that hits next week or 30 years time is the hardest part to predict.

Those who are certain prices are stable are following the millions before them who rest their pint on a wobbly shelf may end up with their drink in the floor.

Those who buy badly are risking a lifetime of financial misery. Those who don’t buy may miss out for a decade (although personally I doubt it)

The key is if you must buy then ignore the hype and buy well….wait for a couple of months of negative sentiment and get something that is suitable for you to live in for 20 years (as much as anyone can predict their circumstances) 

Negative sentiment was around us in November and December and saved 20% off daft summer 2020 prices. Things are booming again but just wait for some bad news…the market dips and rises.

Furlough news should create a sentiment dip…so some motivated sellers may emerge.

Houses are rocketed yet we have a whole thread dedicated to houses showing drops of 20% off asking prices…indeed some at 2005/6 levels.

Buying (for the financially savvy on these threads) should not about buying at average prices based on stats but watching locally and setting yourselves up well. Whilst in the meantime hoping for a normalisation of prices so the average person, on an average wage can buy an average house. 

Good post, reality is King and we ignore it at our peril. The future is unknowable though and so I'm quite happy to ride it out for as long as is necessary and I truly believe I can remain solvent longer than the market remains irrational. I agree buying into a frenzy is a bit of a gamble and waiting for things to calm down should be able to clear the picture a bit. Especially important if you're paying 6 figures for something.

However, a place popped up near me last week for just over £3k excluding garage, and prices have been lurking around the £4-£5k per sqm range for the past 5+ years (Home counties outside the M25). It's a 5 bedder and so I'd need to get a mortgage but that to me was a 'good' price in the current market. I might have even gone for it if I had the full amount to offer cash. Otherwise, prices need to drop by 50%++ before I'd consider being "a prospective buyer".

My circumstances allow me to be patient and so I consider myself ultra-lucky in that regard.

[Kosmin]

20 minutes ago, highcontrast said:

Is anyone else finding MarkyMarks posts as brilliantly amusing as me?

'Worth "£1m"' instead of '"Worth" £1m' - only the value of sterling is uncertain, apparently!

[Kosmin]

14 hours ago, 70PC said:

According to Rightmove, the average house price in Winchester is £617,771. Who buys the average house there and how do they pay back £27k a year over 25 years plus mortgage interest?

Where did you get £27k from? Wouldn't that mean a 110% mortgage?

I think the buyers in this price range are often couples, with one or both having some equity, which significantly reduces the amount they need to borrow. If they are FTBs, they may have been saving for a long time, or they have had big windfalls (e.g. inheritance, gift). 

I expect there are a lot more households earning 60-80k, borrowing 200-400k to buy a 600k house, than households earning 120k+ borrowing 500k+ to buy a 600k house.

[Si1]

2 hours ago, markyh said:

Just because you can’t imagine this lifestyle, there are still millions in the top 15% of incomes and wealth that do, we are seriously planning to buy a 2nd home in Cape Town SA when I retire in 15 years time, and the youngest kid is 22. It’s in our retirement plan to spend 6 months a year living in SA, and will most likely spend up to £250k on a “bolt hole” , and by then our UK house could be worth “£1m”

You big daft melt. I was criticising Inman's lazy use of tabloid language. And then you went off on how fantastic you are. Feel free, the floor is yours.

 

[spyguy]

12 hours ago, markyh said:

Rubbish, you look at this in FTB terms, 90% of buyers will be trading up and transfer a big chunk of equity. As I have said many times since 2016, we bought a £501k house On a 20 year mortgage , on a £5k pcm net income, but put down a £200k deposit built up from 1996. So our mortgage payments are £1600, the remaining £3400 is more than the vast majority of the nation take home as a family in the first place. Everything is relative. They answer is the buyers in Winchester are considerably richer than yawl. 

Even in today's abnormal market, the number of non ftbs is still 50%

You need ftbs to allow property market to transact.

Otherwise probate are going to flood the market.

You also need people at various stages to sell houses to - and I studiously avoid using the 'ladder' word.

[Speed1987]

3 hours ago, 14stFlyer said:

Just one reason that they will go down: It’s a bubble.  And eventually they pop.
 

it does not take 12-14 man years of work and materials to make a house. And therefore houses are not intrinsically worth 12-14x  local salary.  

Is it a bubble though?

Interest rates continue to fall.

Plenty of money pushed into the economy.

House prices are not based on 12-14 man years of building, rather location.

They'll keep rising for the considerable future. 

If wave 4 hits, which is likely expect negative rates.

Edited August 15, 2021 by Speed1987