This Will Be A Day Long Remembered...

[Maghull Mike]

 

[rantnrave]

Some figures on the QT that took place today here:

https://www.bbc.co.uk/news/business-63474176

[steve99]

5 hours ago, rantnrave said:

While its rare to need a reason to quote Darth Vader, this will indeed be a day long remembered...

1. The Help to Buy scheme has formally closed after nearly a decade

2. Quantitative Tightening has begun after over a decade

3. The Nationwide index registered a first fall for over a year and the largest for over two years

Dont hold your breath. We have had glimpses of sunlit uplands many times over the last 20 years but all turned out to be mirages. Nothing less than a 50% fall would make things anything like affordable, 10% or 20% is just the froth of the last 2 years of low supply and Sunaks stamp duty cut. 

[steve99]

3 hours ago, TheCountOfNowhere said:

They'll all die and no one can afford to buy their houses, they'll become probate/forced sales.

Population pyramid says 'not really'    https://www.populationpyramid.net/united-kingdom/2022/    The biggest population bulge is between 30 and 40 years old, ie the prime buying age.   Other factors will be more important in the next 10 years at least, like interest rates, unemployment (looming), economic breakdown magnified by Brexit on top of world events, bank lending tightening and so on.  Govt  will do everything possible to prop prices during this time, votes depend upon it and Sunak has proved his credentials on this issue.   Another issue is that older people in normal houses cannot downsize, there is nowhere to go thanks to the exploitation of old folks housing by freeholders and management companies who have organised things to take all your money like a well oiled casino. 

Edited November 1, 2022 by steve99

[70PC]

5 hours ago, scottbeard said:

Quite agree.  It's all coming together.

This is why I can't see anything other than a 20-40% fall in house prices over the next couple of years.

Agreed on the numbers but the prospect of a longer and slower ratcheting down is also a possibility. The UK mindset that house prices always go up will take time to disabuse. People will hold onto their £350k homes like grim death because because someone in the same road got £550k at the peak of the market.

 

[fellow]

50 minutes ago, rantnrave said:

Some figures on the QT that took place today here:

https://www.bbc.co.uk/news/business-63474176

"It successfully sold the relatively small sum of £750m worth of bonds, out of a total holding of over £838bn".

well it's a start at least. Good luck finding buyers for the remaining 837bn.

[anonguest]

5 hours ago, scottbeard said:

Quite agree.  It's all coming together.

This is why I can't see anything other than a 20-40% fall in house prices over the next couple of years.

In real terms I assume?

In nominal terms though....I find that somewhat harder to envisage happening, especially IF we continue to see at least mid-upper single digit annual inflation rate.  Before too long the cost of just raw materials and labour to build even a basic modest starter house will define the floor in prices.

Let's say, as crude example, the mass production house builders make 50% profit on the properties they sell. The other 50% of the sale price being materials and labour.  IF we further assume wages do not rise at all (unlikely) and materials costs rise at, say, 7% per annum then the price of the materials alone will double in cost within a decade (i.e. the rise in material cost will equate the profit currently made on each unit sold). Factor in labour costs plus some years likely seeing much more than 7% inflation, then the time taken to get to the point where labour and materials equal the current sale price of each unit, will be even sooner.

[Si1]

6 minutes ago, anonguest said:

In real terms I assume?

In nominal terms though....I find that somewhat harder to envisage happening, especially IF we continue to see at least mid-upper single digit annual inflation rate.  Before too long the cost of just raw materials and labour to build even a basic modest starter house will define the floor in prices.

Let's say, as crude example, the mass production house builders make 50% profit on the properties they sell. The other 50% of the sale price being materials and labour.  IF we further assume wages do not rise at all (unlikely) and materials costs rise at, say, 7% per annum then the price of the materials alone will double in cost within a decade (i.e. the rise in material cost will equate the profit currently made on each unit sold). Factor in labour costs plus some years likely seeing much more than 7% inflation, then the time taken to get to the point where labour and materials equal the current sale price of each unit, will be even sooner.

Incorrect, there's no reason why house prices can't drop below the building cost. In depressed markets in the regions this has happened.

[anonguest]

3 minutes ago, Si1 said:

Incorrect, there's no reason why house prices can't drop below the building cost. In depressed markets in the regions this has happened.

Sure. For very short periods of time such anomaly situations can arise in any market - where a product is sold for less than its underlying intrinsic cost.  Existing houses could fall in price below what the equivalent rebuild/identical cost would be.

But house builders won't build new houses to sell at a loss. They will sell at very minimum at what it costs to build.  IF they stop building new supply then supply dwindles and so this too would act as a floor for prices overall?

[Si1]

Just now, anonguest said:

Sure. For very short periods of time such anomaly situations can arise in any market - where a product is sold for less than its underlying intrinsic cost.

It's not really an intrinsic cost when it's decades old.

Just now, anonguest said:

Existing houses could fall in price below what the equivalent rebuild/identical cost would be.

But house builders won't build new houses to sell at a loss. They will sell at very minimum at what it costs to build.  IF they stop building new supply then supply dwindles and so this too would act as a floor for prices overall?

Agreed. Unless there's a spiral of decay, depopulation and deflation.

[scottbeard]

3 hours ago, 70PC said:

Agreed on the numbers but the prospect of a longer and slower ratcheting down is also a possibility. The UK mindset that house prices always go up will take time to disabuse. People will hold onto their £350k homes like grim death because because someone in the same road got £550k at the peak of the market.

True that mindsets take time to adjust.  But Prices are determined by the people that DO sell though, not those who don’t sell.

Mr A won’t sell, but Mr B *has* to sell and only gets 350k

[petetong]

5 hours ago, 70PC said:

Agreed on the numbers but the prospect of a longer and slower ratcheting down is also a possibility. The UK mindset that house prices always go up will take time to disabuse. People will hold onto their £350k homes like grim death because because someone in the same road got £550k at the peak of the market.

 

If energy prices stay high, some in government have said it could last 8 years, a big house is the last thing you'll want.

[winkie]

10 hours ago, steve99 said:

Population pyramid says 'not really'    https://www.populationpyramid.net/united-kingdom/2022/    The biggest population bulge is between 30 and 40 years old, ie the prime buying age.   Other factors will be more important in the next 10 years at least, like interest rates, unemployment (looming), economic breakdown magnified by Brexit on top of world events, bank lending tightening and so on.  Govt  will do everything possible to prop prices during this time, votes depend upon it and Sunak has proved his credentials on this issue.   Another issue is that older people in normal houses cannot downsize, there is nowhere to go thanks to the exploitation of old folks housing by freeholders and management companies who have organised things to take all your money like a well oiled casino. 

This^^^^^^^^

[winkie]

14 hours ago, Casual-observer said:

Because the younger demographic needing to prop these overinflated asset/house prices of the boomer generation are tapped out.

Student debt, credit card debt, etc. Rising rates are amplifying the fundamental flaws in the debt pyramid scheme. The simple fact is they can't get the mortgage's nor the spending power to do it. 

They can bus in all the illegal immigrant's (consumers) they want but fundamentally the spending power just isn't there in enough of the working population burdened with high taxes, high debt and high cost of living.   

. 

The well off older generation would have paid for homes no debt, generous final salary working pensions, state pension, sometimes income from other sources, and are at an age when are still in receipt of inheritances from own parents and relatives......they are not doing badly, if keep healthy and still active have many years of retirement left in front of them...

[steve99]

7 hours ago, winkie said:

This^^^^^^^^

In other words, old folk will do anything not to move out of their family homes (for you to buy) ie adding to housing supply woe's. Its become a big thing in the last couple of years as people are getting savvy re the schemes and scams of this so-called form of housing, ever increasing service fees, exit fees, corrupt management companies (who also run all our new estate house schemes that the council wont adopt).  Also the governments lack of  interest in housing for  this cohort,  eg my mother in law who desperately needs to move to somewhere more suitable than the flat she now owns and lives in has no options and will have to stay till either dead or carried out  to a care home. 

[Timm]

Got Radio 6 on.

Playing Crash by The Primitives.

[Si1]

5 minutes ago, Timm said:

Got Radio 6 on.

Playing Crash by The Primitives.

great early Indie - 1988, right time for the forthcoming 90s recession etc

[winkie]

4 hours ago, steve99 said:

In other words, old folk will do anything not to move out of their family homes (for you to buy) ie adding to housing supply woe's. Its become a big thing in the last couple of years as people are getting savvy re the schemes and scams of this so-called form of housing, ever increasing service fees, exit fees, corrupt management companies (who also run all our new estate house schemes that the council wont adopt).  Also the governments lack of  interest in housing for  this cohort,  eg my mother in law who desperately needs to move to somewhere more suitable than the flat she now owns and lives in has no options and will have to stay till either dead or carried out  to a care home. 

Yes because the government are not interested they leave it to free markets to make what they can from those that they believe have money or own property.......I know of elderly people now who require care employ the services of a live in carer....the carer has a job, and a home comes with the job, the elderly person has a affordable kind, responsible and trained carer and company......win,win.