What happens to house prices if the BoE is right?

[henry the king]

If the economy is doomed, which today's data suggests it is. If high prices are the cure to high prices. And if rates only get to 1.5% (lets say) by the end of the year. 

Then what happens to house prices? Do they go down anyway due to QT and 1.5% being higher rates, due to inflation and due to job loses? Or do house prices stay high?

[wighty]

3 minutes ago, henry the king said:

If the economy is doomed, which today's data suggests it is. If high prices are the cure to high prices. And if rates only get to 1.5% (lets say) by the end of the year. 

Then what happens to house prices? Do they go down anyway due to QT and 1.5% being higher rates, due to inflation and due to job loses? Or do house prices stay high?

If the economy is doomed, get your money in bricks and mortar.

[rantnrave]

7 minutes ago, henry the king said:

If the economy is doomed, which today's data suggests it is. If high prices are the cure to high prices. And if rates only get to 1.5% (lets say) by the end of the year. 

Then what happens to house prices? Do they go down anyway due to QT and 1.5% being higher rates, due to inflation and due to job loses? Or do house prices stay high?

What's the data set out today that's gloomy?

I think CPI would need to break through the 10% barrier and stay there for a full quarter before we'll get a 2% BoE rate...

If that doesn't pan out, I think property prices could remain flat in nominal terms as a stand off between sellers and buyers sets in. Any crash would then be in real terms, with salaries playing catch up.

 

[winkie]

18 minutes ago, wighty said:

If the economy is doomed, get your money in bricks and mortar.

------in another country?

[henry the king]

25 minutes ago, rantnrave said:

What's the data set out today that's gloomy?

I think CPI would need to break through the 10% barrier and stay there for a full quarter before we'll get a 2% BoE rate...

If that doesn't pan out, I think property prices could remain flat in nominal terms as a stand off between sellers and buyers sets in. Any crash would then be in real terms, with salaries playing catch up.

 

Terrible services survey data

[henry the king]

26 minutes ago, rantnrave said:

What's the data set out today that's gloomy?

I think CPI would need to break through the 10% barrier and stay there for a full quarter before we'll get a 2% BoE rate...

If that doesn't pan out, I think property prices could remain flat in nominal terms as a stand off between sellers and buyers sets in. Any crash would then be in real terms, with salaries playing catch up.

 

I think a recession will do more damage than rate rises tbh.

Rates already look like they will get to 1.5% regardless. That is way higher than the last 12 years.

[ExeC-UK]

15 minutes ago, winkie said:

------in another country?

I suspect this applies to most countries. 

[Fromage Frais]

I guess it will be different around the country.

If you are in a dynamic high employment area of the country prices will be more resilient than say my northern wage southern house price rural area.

But what is a crash.... a reversal of the pandemic pumping? here that is 20% of the current price.

Or is a crash 20-30% off 2019 prices which is what should have happened during covid?

Now asking prices in my area are still nuts but there are houses for sale now and a few weeks ago there where only a few so it has cooled from off market > overpriced and waiting.

That's only a few months since rates rose so I am confident they will be impacted severely soon as it takes six months for pumping to hit the prices so its only logical to assume the reverse will also take some months.

Its all or nothing here as upgrading the Essex pad to a detached house in the Norfolk sticks is want not a need.  

Edited May 24, 2022 by Fromage Frais

[scottbeard]

1 hour ago, henry the king said:

If the economy is doomed, which today's data suggests it is. If high prices are the cure to high prices. And if rates only get to 1.5% (lets say) by the end of the year. 

Then what happens to house prices? Do they go down anyway due to QT and 1.5% being higher rates, due to inflation and due to job loses? Or do house prices stay high?

Which precise piece of day published today suggests the economy is "doomed"?

And what, precisely, does "doomed" even mean in the context of the economy?

Once I know that I can consider a response.

[“Nasty Piece of work”]

2 hours ago, wighty said:

If the economy is doomed, get your money in bricks and mortar.

The toppermost illiquid substance.  Lock in all your perceived “wealth”.

 

[henry the king]

53 minutes ago, scottbeard said:

Which precise piece of day published today suggests the economy is "doomed"?

And what, precisely, does "doomed" even mean in the context of the economy?

Once I know that I can consider a response.

Bad survey data for services which is most of the UK economy. Not just bad. Really bad relative to expectation. Same for consumer sentiment. 

[fellow]

If the economy goes into a depression, this is deflationary and house prices will collapse unless they start printing money (QE) again. However, it is the money printing which has caused the inflation and hence the recession in the first place so the BOE are stuck between a rock and a hard place.

My thoughts are that too much money will be needed to save house prices this time and the BOE will conclude that targeting inflation and saving the currency is the best option or everything will just collapse into a hyperinflationary spiral of no return.

Pumping more and more money in over the last decade has just kicked the can down the road and made the debt problem even worse.

[PeanutButter]

2 hours ago, rantnrave said:

What's the data set out today that's gloomy?

I think CPI would need to break through the 10% barrier and stay there for a full quarter before we'll get a 2% BoE rate...

If that doesn't pan out, I think property prices could remain flat in nominal terms as a stand off between sellers and buyers sets in. Any crash would then be in real terms, with salaries playing catch up.

 

UK economy has ALREADY ground to a halt and is 'knocking on the door' of recession with Britons facing return of Stagflation

https://www.dailymail.co.uk/news/article-10848867/UK-economy-ground-halt-knocking-door-recession-finds-survey.html

The UK economy has almost ground to a halt in the face of soaring inflation, according to an influential survey.

It was found that private sector growth slumped this month as the cost-of-living crisis began to hit Britons' spending ability.

Experts even warned that 'worse is to come' and 'recession is knocking on the door'.

[byron78]

Again, if it does crash it'll just play out like it often does now in America.

Corporations and companies with come in and hoover up all the "cheap" property, then look to reinflate asset prices and rents.

Hasn't quite got to the point where they're deliberately running down areas to make that happen, but won't be far off.

Which I guess would then make Robocop a documentary?

 

 

[henry the king]

On the fence as to whether the BoE raise rates now.

Honestly if we can get to 1.25% in June I will be happy.

[iamnumerate]

42 minutes ago, fellow said:

If the economy goes into a depression, this is deflationary and house prices will collapse unless they start printing money (QE) again. However, it is the money printing which has caused the inflation and hence the recession in the first place so the BOE are stuck between a rock and a hard place.

My thoughts are that too much money will be needed to save house prices this time and the BOE will conclude that targeting inflation and saving the currency is the best option or everything will just collapse into a hyperinflationary spiral of no return.

Pumping more and more money in over the last decade has just kicked the can down the road and made the debt problem even worse.

+1

[Sour Mash]

4 hours ago, henry the king said:

If the economy is doomed, which today's data suggests it is. If high prices are the cure to high prices. And if rates only get to 1.5% (lets say) by the end of the year. 

Then what happens to house prices? Do they go down anyway due to QT and 1.5% being higher rates, due to inflation and due to job loses? Or do house prices stay high?

 

The lesson of the last couple of decades is that price is largely irrelevent if mortgage credit is available, somewhat affordable to service, and people are willing to take it on.

Expect the government to explicitly underwrite cheap mortgage loans as some point.

 

 

[scottbeard]

1 hour ago, henry the king said:

Bad survey data for services which is most of the UK economy. Not just bad. Really bad relative to expectation. Same for consumer sentiment. 

OK...it looks like we are heading for a recession, and recessions cause a dip in house prices regardless of interest rates (see 2008).  How big the dip is and for how long it persists could be anything.  In 2008 it should have been a monumental dip, but ended up being only 15% because interest rates were cut.  Now rates were cut, but despite what a lot of people post here the overall economic situation is not as bad as 2008 (we are, in effect, in the tail end of the 2007/8 crisis now).

[scottbeard]

40 minutes ago, henry the king said:

On the fence as to whether the BoE raise rates now.

Honestly if we can get to 1.25% in June I will be happy.

I continue to believe that interest rates on 31 Dec 2022 will be in the range 1.5-2.0%.  Nothing has yet dissuaded me from that up or down.

[zugzwang]

1 minute ago, scottbeard said:

OK...it looks like we are heading for a recession, and recessions cause a dip in house prices regardless of interest rates (see 2008).  How big the dip is and for how long it persists could be anything.  In 2008 it should have been a monumental dip, but ended up being only 15% because interest rates were cut.  Now rates were cut, but despite what a lot of people post here the overall economic situation is not as bad as 2008 (we are, in effect, in the tail end of the 2007/8 crisis now).

🤔

[scottbeard]

1 minute ago, zugzwang said:

🤔

Not quite sure how to take this....you seem not to agree so what part don't you agree with and what do you think will happen?

[henry the king]

17 minutes ago, scottbeard said:

I continue to believe that interest rates on 31 Dec 2022 will be in the range 1.5-2.0%.  Nothing has yet dissuaded me from that up or down.

Well that is the market expectation and fits with comments from the BoE.

So that makes sense.

But if economic data is weaker then we are looking at the 1.5% end not the 2% end. 

1.5% is still "high" for this modern era. And it will have an impact on house prices. The 1% rise hasn't fully filtered into mortgage rates yet. 

The question is, what impact will the recession have. Will it cause prices to drop further even if rates stay lower? 

I think a recession probably will have more impact than rates but I am not sure.

[Orb]

41 minutes ago, henry the king said:

The question is, what impact will the recession have. Will it cause prices to drop further even if rates stay lower? 

If the past few years are any gauge, I predict 20-30% increases 😄

No but, seriously, that wouldn't surprise me. 

[zugzwang]

50 minutes ago, scottbeard said:

Not quite sure how to take this....you seem not to agree so what part don't you agree with and what do you think will happen?

I think you're massively underestimating the size and scope of the recession. Energy affordability is going to take years to fix. On top of that we're looking at apocalyptic global food shortages. Not my words, those of the Governor of the Bank of England, a man not given to hyperbole.

And this at a time when every one of the G20 economies still hopelessly underwater from the GFC and Covid.

To me, the 1930s are a better parallel than the 1970s.

[Insane]

5 minutes ago, zugzwang said:

On top of that we're looking at apocalyptic global food shortages.

This is the Big one. 

In conversations re housing economy ect I have often posed the question to people -:

What would you do first Feed your children or pay the mortgage/rent ? The answer always comes back feed the children. 

It is not something that the average person has had to think about much over the last few decades but could be something we will be considering in the future. The days of food being relatively cheap compared to average income's are maybe coming to an end.