Jump to content
House Price Crash Forum
BillyShears

Demand At Different Price Ranges

Recommended Posts

One thing that I have been curious about is the claims that there is strong and growing demand for property in the UK. If the population is rising faster than the number of houses divided by average occupancy rate, then this should be an upward influence on prices. But not everyone in the country can afford every property in the country.

I can't see the point of estimating demand for things that doesn't take into account what people can afford. For example I'm sure if you asked young males (in particular) whether they would really like to own a Ferrari, many would say yes. But that doesn't mean that there's a demand for millions of Ferraris in this country as only a very small percentage of those men could afford one.

Surely the same applies to housing. If the country goes through a sustained bout of house price inflation, without equal wage inflation, then the number of people who can afford certain properties must fall. Taking an arbitrary division of property into that property >= £200K and <= £200K then with massive HPI the amount of property >= £200K rises significantly, and the amount of property <= £200K falls considerably. Assuming that before the HPI only a certain percentage of people could afford property >= £200K, and that limited wage inflation means that this number increased in a much lower percentage than the proportion of houses available, then the supply/demand for houses >£200K must have fallen. However assuming that population and the houses available have remained roughly in proportion, the demand for houses <= £200K should have gone up considerably.

So we could easily have a glut of certain types of properties even if there is an undersupply overall. And extreme HPI could result in a situation where there is a shortage of property, but it is so highly priced, that no property finds a buyer. Hence even with full employment and a shortage of houses, house prices must crash as there is no-one left to buy them.

Thoughts?

Billy Shears

Share this post


Link to post
Share on other sites
Guest

Agreed.

This is why PRICE is NOT my number one reason for NOT buying. :P

A lack of wage inflation is my number one reason for NOT buying.

Not just because of what it means for me - as a non-home-owner - but what it currently means for the people in the middle to upper layers of the market.

EDIT- This is an excellent point, Billy, because it explains why we're going to have something of a house price crash, even if interest rates stay on hold.

Edited by megaflop

Share this post


Link to post
Share on other sites

I think the answer to this is complicated.

At the moment there is an over supply of 2 bedroom flats. I see this in London as I am trying to rent a room. Now I want to rent a room in a friendly house of say 4-5 people. The price for a room in a house is more than it is in a 2 bedroom flat despite this being completly against the rental yield for the two properties.

The thing is more and more flats are being built, because it's easy to and you can obviously get a lot more onto one space of land.

So what happens in the future? Well if house prices don't fall then when all the people who have bought their 2 bed flats with huge mortgages over 25 years taking upto 50% of their income and little wage inflation they will not be able to afford to move into the bigger houses. So maybe we will actually see demand for bigger houses fall because people can not purchase them.

If however these is a housing crash then more people will be able to trade up to bigger houses. The demand for those will then rise and flats fall.

So that's pretty much how I see it. A crash in property prices will affect flats the most for two reasons, there are already too many of them and because those that can afford to will be moving out of them. If there is no crash then the bigger houses that 30 year olds want to move to to have kids will not be able to so effective demand for those will be constrained.

What ever way you look at it, buying a 4 bed semi/detached is a lot better bet than buying some flats - esepecially in London.

Share this post


Link to post
Share on other sites

Hence even with full employment and a shortage of houses, house prices must crash as there is no-one left to buy them.

The flaw in this argument as far as I can tell is that prices will only fall if people are forced to sell. People seem to be quite happy to generally wait around for buyers for as long as it takes because they don't feel any pressure to sell. We also don't seem to be anywhere near the point where no-one is left to buy properties.

We will soon be two years into the five year 'crash' assuming the peak of mid 2004. Where's the 1% monthly falls that were predicted to begin towards the end of last year? Where's the rising UK base rate that has been predicted over and over? Sorry if I sound sceptical.

Share this post


Link to post
Share on other sites
Guest

The flaw in this argument as far as I can tell is that prices will only fall if people are forced to sell. People seem to be quite happy to generally wait around

But this could happen anyway, even without a boom.

Obviously we're talking about the people who need to enter the market.

What it means is that the houses aren't worth what people think.

Share this post


Link to post
Share on other sites

But this could happen anyway, even without a boom.

Obviously we're talking about the people who need to enter the market.

What it means is that the houses aren't worth what people think.

What could happen anyway?

People don't need to enter the market - they just want to enter it.

Houses are worth what they sell for. The prices that people think they are are more or less what they really are. If there was a general continual fall in house prices, it would become noticeable to everyone as the stats would reflect it - no amount of fiddling would be able to hide this - not that I think any fiddling goes on, but people are free to believe whatever they want to believe.

Share this post


Link to post
Share on other sites
Guest Cletus VanDamme

From what I've read elsewhere about previous housing booms and busts (sorry for the lack of a link), in a boom the price of flats rises more sharply than that of houses, but in the bust, the price of flats fall faster than the price of houses.

So, if you want to or must buy now, and are buying at the lower end of the market, but want to reduce the risk, it would make sense to buy a 2-bed terrace in favour of a 2-bed flat.

Looking at prices of newbuild 2bedders compared to 2-bed Victorian terraces round my way, the difference isn't that great anyway (in fact often the flats are more expensive), but you can bet that, if we do have a crash, that gap will widen considerably.

Share this post


Link to post
Share on other sites

"The flaw in this argument as far as I can tell is that prices will only fall if people are forced to sell. People seem to be quite happy to generally wait around for buyers for as long as it takes because they don't feel any pressure to sell."

People will always need to sell. People die, get divorced, get together, get pregnant so need more space, retire and need to release capital, lose their jobs, get a new job in a different city etc. Life goes on. Lots of reasons to sell, and with varying degrees of pressure. I haven't even mentioned debt, or panic.

Share this post


Link to post
Share on other sites

What could happen anyway?

People don't need to enter the market - they just want to enter it.

Houses are worth what they sell for. The prices that people think they are are more or less what they really are. If there was a general continual fall in house prices, it would become noticeable to everyone as the stats would reflect it - no amount of fiddling would be able to hide this - not that I think any fiddling goes on, but people are free to believe whatever they want to believe.

But only a certain number of houses above a certain price can sell. So it doesn't matter if everyone agrees that certain houses are worth £X if no-one can then afford to buy them.

Prices for houses are set at the margin. So let's assume that we have 100 houses of a certain type in a certain city. HPI means that these are worth £500K each when a few years ago they were worth £250K. Due to limited wage inflation the number of people who could buy one of these houses has shrunk to a tiny fraction of what it was before. So what happens? Assuming that "sentiment" is still that house prices are increasing, then the sellers are not prepared to lower their prices, and buyers will be prepared to pay the price. If they can afford it that is. So what happens to these houses? Of those that go on the market, a few will sell at a good price, because "house prices are going up" and there are a few buyers who are pared to buy them. The others do not sell. But since the value of houses are set by those that sell, even if there are only enough buyers to buy a tiny fraction of those on offer, the prices will still officiallly be rising.

Billy Shears

Edited by BillyShears

Share this post


Link to post
Share on other sites

But only a certain number of houses above a certain price can sell. So it doesn't matter if everyone agrees that certain houses are worth £X if no-one can then afford to buy them.

Prices for houses are set at the margin. So let's assume that we have 100 houses of a certain type in a certain city. HPI means that these are worth £500K each when a few years ago they were worth £250K. Due to limited wage inflation the number of people who could buy one of these houses has shrunk to a tiny fraction of what it was before. So what happens? Assuming that "sentiment" is still that house prices are increasing, then the sellers are not prepared to lower their prices, and buyers will be prepared to pay the price. If they can afford it that is. So what happens to these houses? Of those that go on the market, a few will sell at a good price, because "house prices are going up" and there are a few buyers who are pared to buy them. The others do not sell. But since the value of houses are set by those that sell, even if there are only enough buyers to buy a tiny fraction of those on offer, the prices will still officiallly be rising.

Billy Shears

Until the sentiment changes and goes in the other direction. Then you have the opposite problem, no one wants to sell them because the price has gone down so far - but again the market will be set by the extremities - those that have to sell for whatever reason.

The trend works both ways. It's obviously not as quick as a stock market or gold market crash where liquidty is very high - but motivated buyers/sellers will be the ones that guide the price in both a boom or crash.

Share this post


Link to post
Share on other sites

=============

This is a new argument though I think the forum software will merge it with my previous answer.

Another thing that I think is very complicated is how HPI should (in theory) move demand around. For example in a cheap market such as the mid 90s, people will have far more choice where they live. And hence they will tend to go for the better areas. As prices rise, the number of people who are able to choose the better areas will fall, resulting in less demand for houses in those areas. In cheaper areas, there will be some people who would then choose to live in that area because they cannot afford a better area. That increases demand for the cheaper area. But there are then people who previously would have been able to afford the cheaper area who can no longer afford it, so this decreases demand. This movement of "demand" would then continue down through the areas until you get to the cheapest areas. People priced out of these areas would then be completely priced out. So what happens to the demand in particular areas is highly dependent on the number of people who would consider the area now due to HPI making their more desired areas (or types of houses) unattainable, and the number priced out. I haven't seen graphs of wages in the UK, but I'd assume that the proportion of people receiving income of a certain level decreases rapidly as the income level increases. So, all else being equal, the number of people "coming in" to an area would be fewer than those being priced out. Especially since I think we can assume that those on minimum income are priced out of anywhere.

This ignores a lot of points. E.g. there may be a lot of professional people who have been priced out of anywhere except the oft-mentioned "hellholes", but who would rather buy nowhere than buy in a place they don't want to live in.

Someone mentioned these "luxury" newbuild flats being built everywhere. This is an example as these things are designed and sold, either to, or to be rented to, "young professionals" of a certain income level or above. How many of these flats are being built, and how many young professionals are there? Do the numbers add up?

Billy Shears

Share this post


Link to post
Share on other sites

Hmmm. Good thread.

The fact that prices are set at the margins means that only the economically successful will move, which will presumably sustain the illusion of a healthy market for some time, as the number of such people is statistically significant. Also older people with equity in their homes churning it back into the market either as BTL or by subsidising their kids. One way or the other this boom has certainly gone on for longer, and to greater heights, than seems rationally prudent. Funded of course by ludicrously lax lending.

I can't see any way in which the numbers add up and in which the demand for the new flats being built is based on good old-fashioned demand. It looks like effective demand (ie demand backed by money) driven almost entirely by speculation. These flats are a colossal delusion because they are being built to sell to people who have absolutely no intention of ever living in them. They are also funding them by taking out long-term loans based on the incomes of the people who they intend to rent them too.

This is actually a curious paradox that I haven't seen addressed here - BTL is based on mortgaging the income streams of young people (priced-out tenants in the main). Either these people will never be able to buy, in which case there will be unbearable social tensions and massive demands on state funding in the future, or they will buy, in which case the income stream mortgaged by the BTLer is withdrawn. Of course they might find another tenant, but in principle BTL can only work into the future if there are enough working tenants to rent all the BTL properties; because voids will lead to downward pressure on rents which could get into a vicious downward spiral pretty quickly.

Haven't worked this out fully but I suspect we'll see in the not too distant future that BTL mortgaging of younger peoples' income streams will turn out to be a massive short-term cash injection into the economy, the equivalent of ten years' worth of new housing market money in five (2001 to 2010 in the period 2001 to 2006). If this is correct it helps to explain why the market has been propelled to such irrational heights which, as the OP says, shouldn't be happening.

Share this post


Link to post
Share on other sites

I can't see the point of estimating demand for things that doesn't take into account what people can afford. For example I'm sure if you asked young males (in particular) whether they would really like to own a Ferrari, many would say yes. But that doesn't mean that there's a demand for millions of Ferraris in this country as only a very small percentage of those men could afford one.

I've made a very similar point on here more than once – I like to look at is this way...

If 1000 people want a Mars bar and the local shop has 100 in stock the shopkeeper will argue that there are ten buyers for each of his Mars bars, hence a massive demand. But each potential buyer only has 30p to spend and the shop charges 40p, so noone will buy a Mars bar because they can't afford one and all will remain hungry. Tomorrow there'll still be 1000 people wanting a Mars bar at 30p and a shop with 100 Mars bars at 40p, so the shopkeeper stands firm – There are ten buyers for each of his Mars bars so there is more than enough demand to justify asking 40p for them. Eventually, however, the shopkeeper realises he's going to go out of business if he doesn't offload his stock of Mars bars, and he drops the price. It's the only way he's going to sell them.

Share this post


Link to post
Share on other sites

But only a certain number of houses above a certain price can sell. So it doesn't matter if everyone agrees that certain houses are worth £X if no-one can then afford to buy them.

Yes, all true, but I was pointing out that this does not necessarily lead to a crash as megaflop and others have suggested. It doesn't matter if no-one can buy if few people are forced to sell. I thought numbers of houses being sold was increasing anyway.

If 1000 people want a Mars bar...Eventually, however, the shopkeeper realises he's going to go out of business if he doesn't offload his stock of Mars bars, and he drops the price. It's the only way he's going to sell them.

Yes but in the case of the housing market each seller owns a single property and will not go out of business if they fail to sell it. Of course, BTLs will have multiple properties to sell, but I am unconvinced that they make up a significant percentage of the market if you're arguing for a crash. House builders also have multiple new properties to sell, but let's be clear, the argument is that there will be a general crash across all types of properties in all regions during the same period of time. Does it look like that's happening? Not to me it doesn't.

Forced sellers are needed, and I'm not talking about the odd couple getting divorced or the odd person losing their job. Unemployment or the UK base rate has to rise dramatically to cause problems in my opinion.

Share this post


Link to post
Share on other sites

=============

This is a new argument though I think the forum software will merge it with my previous answer.

Another thing that I think is very complicated is how HPI should (in theory) move demand around. For example in a cheap market such as the mid 90s, people will have far more choice where they live. And hence they will tend to go for the better areas. As prices rise, the number of people who are able to choose the better areas will fall, resulting in less demand for houses in those areas. In cheaper areas, there will be some people who would then choose to live in that area because they cannot afford a better area. That increases demand for the cheaper area. But there are then people who previously would have been able to afford the cheaper area who can no longer afford it, so this decreases demand. This movement of "demand" would then continue down through the areas until you get to the cheapest areas. People priced out of these areas would then be completely priced out. So what happens to the demand in particular areas is highly dependent on the number of people who would consider the area now due to HPI making their more desired areas (or types of houses) unattainable, and the number priced out. I haven't seen graphs of wages in the UK, but I'd assume that the proportion of people receiving income of a certain level decreases rapidly as the income level increases. So, all else being equal, the number of people "coming in" to an area would be fewer than those being priced out. Especially since I think we can assume that those on minimum income are priced out of anywhere.

This ignores a lot of points. E.g. there may be a lot of professional people who have been priced out of anywhere except the oft-mentioned "hellholes", but who would rather buy nowhere than buy in a place they don't want to live in.

Someone mentioned these "luxury" newbuild flats being built everywhere. This is an example as these things are designed and sold, either to, or to be rented to, "young professionals" of a certain income level or above. How many of these flats are being built, and how many young professionals are there? Do the numbers add up?

Billy Shears

Good point, I think this is why we get new areas of gentrification. People are priced out of the usual upmarket areas, and are forced to buy elsewhere. Some areas attain a critical mass of affluent people which then stimulates a demand for delicatessans, coffee shops and fusion restaurants. Traders supply this demand, the area becomes even more desirable, and prices go up. People are priced out again - repeat ad nauseam.

There comes a point though, where the only affordable properties are in such awful areas, that even the terminally stupid baulk at buying. At this point IMO the market stagnates, and it then only needs a trigger to topple the house of cards.

At this point, the new build studio/one-beds in run-down areas initially look desirable, but after any correction become essentially unsaleable. When the young professionals are forced to move out at a loss, for whatever reason, and the DSS start moving in council tenants, the new builds become the new social housing essentially funded by the private sector.

TLM

Share this post


Link to post
Share on other sites

Yes, all true, but I was pointing out that this does not necessarily lead to a crash as megaflop and others have suggested. It doesn't matter if no-one can buy if few people are forced to sell. I thought numbers of houses being sold was increasing anyway.

Yes but in the case of the housing market each seller owns a single property and will not go out of business if they fail to sell it. Of course, BTLs will have multiple properties to sell, but I am unconvinced that they make up a significant percentage of the market if you're arguing for a crash. House builders also have multiple new properties to sell, but let's be clear, the argument is that there will be a general crash across all types of properties in all regions during the same period of time. Does it look like that's happening? Not to me it doesn't.

Forced sellers are needed, and I'm not talking about the odd couple getting divorced or the odd person losing their job. Unemployment or the UK base rate has to rise dramatically to cause problems in my opinion.

I disagree. Let's just assume for a moment that there is such a thing as a 'housing ladder. People have to sell houses to move up (or off) the ladder. So you can have people holding onto the properties if they don't get their aspirational prices. Or you can have a working property ladder. You can't have both if demand for certain types of properties falls. And as also discussed in another thread, if people want to move up the ladder, it's easier for this to happen if prices go down, as they have in many areas and for many types of properties. So to make the move that they want to move, they have to sell. I know of sensible property owners who want prices to crash, because then they can move up.

If we add up all the reasons why people move, there are a lot of them. Moving to a different type of house such as moving to a house with more bedrooms. Moving to a different area with better schools or other facilities, or to escape an unattractive local environment. Moving to a different city after a change of job. Death, and divorce, as mentioned. None of these are major by themselves. And some of them are choice rather than necessity, but all of them add up to a certain amount of desire on people's behalf to sell their houses. We can theorise that if people can't get the prices they want then they'll just stay put, stop changing jobs, stop moving up the ladder, or similar. Or, we can theorise that they'll start getting used to the idea that they may get less for their property than it was once valued at.

There is certainly a lot of desire on the part of property owners to sell houses. I don't know where you live but if you walk around Leicester there are for sale signs all over the place. And quite a lot of these properties are up for prices that are slightly less than peak. After all, the crash is not going to occur suddenly so that people who thought that they could sell their properties for a certain amount will suddenly be forced to sell them for half that. If demand falls, houses will go on for a certain amount, and sellers may end up accepting a 90% or 95% offer. That establishes a new market price. Next people selling may price slightly above the previous sale prices, accept a 90% or 95% offer, and this establishes a slightly lower price. Suddenly people realise that prices have snuck down a half a percent at a time and now prices are 10% lower. Then the panic selling begins. And it doesn't require a major part of the market to start selling at once. It only takes a tiny proportion of the total number of houses to go on the market at once to produce a buyers market and away we go.

Billy Shears

Share this post


Link to post
Share on other sites

This is actually a curious paradox that I haven't seen addressed here - BTL is based on mortgaging the income streams of young people (priced-out tenants in the main). Either these people will never be able to buy, in which case there will be unbearable social tensions and massive demands on state funding in the future, or they will buy, in which case the income stream mortgaged by the BTLer is withdrawn. Of course they might find another tenant, but in principle BTL can only work into the future if there are enough working tenants to rent all the BTL properties; because voids will lead to downward pressure on rents which could get into a vicious downward spiral pretty quickly.

I think this is an interesting point. I'm not an economist so can't give it the kind of answer it deserves, but will have a go. BTL is based upon mortgaging the income streams of young people. But there is a difference in the risk should interest rates change. If, say, interet rates go to 6% then it's the landlord who gets lumbered with the increased mortgage payments, not the tenant. So, while the income needed to purchase a property can be provided by the tenant, the owner of the property, the landlord takes on all the risk. If the size of the mortgage is such that even if interest rates go up significantly the rent will still cover it, then the risk taken by the landlord is small. However at current prices and interest rates, I'd say that the risk being taken by BTL'ers is large. However, since many recent BTL'ers are recent investors, they may not even know what a risk premium is, let alone that the 'risk premium' that they are getting is too small. I'm reminded of something said on "Dragon's Den" where one of the "Dragons" said that he expected to make a massive profit on any investment that he makes to compensate for the majority of investments that he makes which go down the toilet. With many BTL'ers believing that property prices only ever go up, and that interest rates will only go down, they will accept returns that are way too small for the risk that they take because they are not aware of the risk. A few voids or a sudden realisation that house prices have gone down will bring this to their attention pretty quickly.

Billy Shears

At this point, the new build studio/one-beds in run-down areas initially look desirable, but after any correction become essentially unsaleable. When the young professionals are forced to move out at a loss, for whatever reason, and the DSS start moving in council tenants, the new builds become the new social housing essentially funded by the private sector.

I've been thinking about this. Landlords typically do not want DSS tenants. See any of the forums such as Landlordzone, and there are lots of landlords saying "never again". But I wonder how many months of void a landlord will have to experience before DSS tenants start looking rather attractive.

Billy Shears

Share this post


Link to post
Share on other sites

I've made a very similar point on here more than once – I like to look at is this way...

If 1000 people want a Mars bar and the local shop has 100 in stock the shopkeeper will argue that there are ten buyers for each of his Mars bars, hence a massive demand. But each potential buyer only has 30p to spend and the shop charges 40p, so noone will buy a Mars bar because they can't afford one and all will remain hungry. Tomorrow there'll still be 1000 people wanting a Mars bar at 30p and a shop with 100 Mars bars at 40p, so the shopkeeper stands firm – There are ten buyers for each of his Mars bars so there is more than enough demand to justify asking 40p for them. Eventually, however, the shopkeeper realises he's going to go out of business if he doesn't offload his stock of Mars bars, and he drops the price. It's the only way he's going to sell them.

I like the analogy, but I would suggest that he is selling Mars Bars at a 1.50 at the moment. If he dropped them to 40p which is 10p over the odds, but most people could probably borrow the extra 10p from a mate, and I reckon their would be a rush of hungry Mars Bars purchasers - he would still make a greedy profit on his 5p per unit purchase.

Share this post


Link to post
Share on other sites

I've made a very similar point on here more than once – I like to look at is this way...

If 1000 people want a Mars bar and the local shop has 100 in stock the shopkeeper will argue that there are ten buyers for each of his Mars bars, hence a massive demand. But each potential buyer only has 30p to spend and the shop charges 40p, so noone will buy a Mars bar because they can't afford one and all will remain hungry. Tomorrow there'll still be 1000 people wanting a Mars bar at 30p and a shop with 100 Mars bars at 40p, so the shopkeeper stands firm – There are ten buyers for each of his Mars bars so there is more than enough demand to justify asking 40p for them. Eventually, however, the shopkeeper realises he's going to go out of business if he doesn't offload his stock of Mars bars, and he drops the price. It's the only way he's going to sell them.

Your analogy is similar, but not identical. In your case, all of the ten potential buyers could actually buy the Mars bar for 40p, so the only thing holding them back is that they feel that the Mars bar is overpriced. But say that car sales yards worked out that Ferrari and Lamboghini dealerships made a greater profit than bread and butter cars. So every car dealership gets rid of their existing stock and loads up with expensive Italian supercars. Every car dealership in the country then notices massive increase in interest in the cars they have on show. The cars could even be priced at quite reasonable prices that everyone agrees are cheap. "210K for a Lambo? Wow!". But do they sell the cars? No 'cos people can't afford them. Though what's happened with the housing market is more like if the car dealers replaced the price tags of their current stock with supercar price tags, even though they're selling the same old cruddy low-spec cars.

Billy Shears

Share this post


Link to post
Share on other sites

Your analogy is similar, but not identical. In your case, all of the ten potential buyers could actually buy the Mars bar for 40p, so the only thing holding them back is that they feel that the Mars bar is overpriced. But say that car sales yards worked out that Ferrari and Lamboghini dealerships made a greater profit than bread and butter cars. So every car dealership gets rid of their existing stock and loads up with expensive Italian supercars. Every car dealership in the country then notices massive increase in interest in the cars they have on show. The cars could even be priced at quite reasonable prices that everyone agrees are cheap. "210K for a Lambo? Wow!". But do they sell the cars? No 'cos people can't afford them. Though what's happened with the housing market is more like if the car dealers replaced the price tags of their current stock with supercar price tags, even though they're selling the same old cruddy low-spec cars.

Billy Shears

Yep. Current house prices are tantamount to a car dealer asking Porsche Boxster money for a 1.8 Mondeo.

Share this post


Link to post
Share on other sites

The flaw in this argument as far as I can tell is that prices will only fall if people are forced to sell. People seem to be quite happy to generally wait around for buyers for as long as it takes because they don't feel any pressure to sell.

We will soon be two years into the five year 'crash' assuming the peak of mid 2004. Where's the 1% monthly falls that were predicted to begin towards the end of last year? Where's the rising UK base rate that has been predicted over and over? Sorry if I sound sceptical.

You do sound sceptical - no apology required.

The 'flaw' is the whole point of the site really.

Make your point again and mention record personal debts, increasing unemployment, and huge MEWing.

I dont think the assumption that people are getting into trouble is in any way outlandish.

Yes but in the case of the housing market each seller owns a single property and will not go out of business if they fail to sell it. Of course, BTLs ........unconvinced that they make up a significant percentage of the market

How many homeowners went 'out of business' in the 1990s when there were even less BTLs on the market?

...... but let's be clear, the argument is that there will be a general crash across all types of properties in all regions during the same period of time. Does it look like that's happening? Not to me it doesn't.

Hmmm- 'lets muddy the waters'. A crash is a crash is a crash. Not everones house is gonna fall by the same amount at the same time - thats just daft. But you'll know it when you see it.

I see it now, where I am in South Manchester - stalled last summer and is pretty much on its ear at the moment.

Forced sellers are needed, and I'm not talking about the odd couple getting divorced or the odd person losing their job. Unemployment or the UK base rate has to rise dramatically to cause problems in my opinion.

You've just named them - the builders. You dont really think they will keep prices high and hold empty stock just to maintain the mirage of high prices. These are the most motivated of sellers and hold huge volumes of stock (far more than the BTL brigade) - they also have huge scope for reductions. Their ONLY aim is to turn a profit - any profit.

If Mrs L Lady is trying to offload a flat she bought at 100k, and the builders are offloading at 90k well thats just tough luck.

Watch as the big builders sales decline and input prices rise rapidly as last years oil hikes come through the supply chain.

Share this post


Link to post
Share on other sites

You've just named them - the builders. You dont really think they will keep prices high and hold empty stock just to maintain the mirage of high prices. These are the most motivated of sellers and hold huge volumes of stock (far more than the BTL brigade) - they also have huge scope for reductions. Their ONLY aim is to turn a profit - any profit.

If Mrs L Lady is trying to offload a flat she bought at 100k, and the builders are offloading at 90k well thats just tough luck.

Watch as the big builders sales decline and input prices rise rapidly as last years oil hikes come through the supply chain.

That's a very good point. Builders need to build and sell houses and flats, or as Bingley Bloke said for EAs, they go bust. So they must keep on building and selling, no matter what happens.

Billy Shears

Share this post


Link to post
Share on other sites

I've made a very similar point on here more than once – I like to look at is this way...

If 1000 people want a Mars bar and the local shop has 100 in stock the shopkeeper will argue that there are ten buyers for each of his Mars bars, hence a massive demand. But each potential buyer only has 30p to spend and the shop charges 40p, so noone will buy a Mars bar because they can't afford one and all will remain hungry. Tomorrow there'll still be 1000 people wanting a Mars bar at 30p and a shop with 100 Mars bars at 40p, so the shopkeeper stands firm – There are ten buyers for each of his Mars bars so there is more than enough demand to justify asking 40p for them. Eventually, however, the shopkeeper realises he's going to go out of business if he doesn't offload his stock of Mars bars, and he drops the price. It's the only way he's going to sell them.

Ah, but you fail to account for "shared equity". Each person can own 10% of a Mars bar for their 30p. This makes sense, as Mars bars only ever go up in value.

T&T

Share this post


Link to post
Share on other sites

That's a very good point. Builders need to build and sell houses and flats, or as Bingley Bloke said for EAs, they go bust. So they must keep on building and selling, no matter what happens.

Billy Shears

Builders' price cuts are likely to be one of the strongest forces pushing pricees down, as builders have plenty of room to reduce prices and will be the quickest to respond to lower sales.

However the pressure from builders will only initially apply to new-build property, which is currently seriously overpriced.

On "second-hand" property the pressures are still there of course, but a bit more dispersed - applying through EAs and forced sellers (EAs may try to push prices down, but vendors are likely to be sticky downwards, ie hard to persuade, so it is not as simple as a builder cutting prices).

The question is how far new-builds could fall, and how much of a knock-on effect we'll get elswhere if new-builds do start to fall, as I think they must.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.