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Father Fred

If Prices Do Crash 30% How Many Will Really Be Affected?

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Just got thinking. Let's say prices levelled off in mid 2005 and are now starting to fall, and let's say they will fall 30% in nominal terms over 3 years, before starting to rise. Let us also assume that they were rising at 15% per annum prior to mid 2005.

Forgive me for rounding but -

2003 buyers - will be fine (well, a poor investment but they're on the ladder which means a lot to many people)

2004 buyers - will be 15% down if they sell at trough

2005 buyers - will be 30% down if they sell at trough

How many people does that really affect... not a huge amount in my opinion. Most buyers will not be forced to sell, many that do will be trading up so will benefit from having less of a step up to make.

As for would be FTBs. How many will spot the trough and buy in 2008, and how many will watch as prices start to rise and end up buying at only 10 or 20% off current peak, or worse still miss the boat a second time?

FF

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Just got thinking. Let's say prices levelled off in mid 2005 and are now starting to fall, and let's say they will fall 30% in nominal terms over 3 years, before starting to rise. Let us also assume that they were rising at 15% per annum prior to mid 2005.

Forgive me for rounding but -

2003 buyers - will be fine (well, a poor investment but they're on the ladder which means a lot to many people)

2004 buyers - will be 15% down if they sell at trough

2005 buyers - will be 30% down if they sell at trough

How many people does that really affect... not a huge amount in my opinion. Most buyers will not be forced to sell, many that do will be trading up so will benefit from having less of a step up to make.

I was wondering about all these predictions that a drop in house prices will mean the end of the UK as a first world country. The MEW-machine may dry up a bit, but I'm not convinced of an oncoming economic apocalypse.

As for would be FTBs. How many will spot the trough and buy in 2008, and how many will watch as prices start to rise and end up buying at only 10 or 20% off current peak, or worse still miss the boat a second time?

There was a thread the other day of how much people have learnt from HPC. If I knew what I knew now in 1996...... If I buy at less than 10% either side of the true trough, then I'll be thinking that I did well.

Billy Shears

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Just got thinking. Let's say prices levelled off in mid 2005 and are now starting to fall, and let's say they will fall 30% in nominal terms over 3 years, before starting to rise. Let us also assume that they were rising at 15% per annum prior to mid 2005.

Forgive me for rounding but -

2003 buyers - will be fine (well, a poor investment but they're on the ladder which means a lot to many people)

2004 buyers - will be 15% down if they sell at trough

2005 buyers - will be 30% down if they sell at trough

How many people does that really affect... not a huge amount in my opinion. Most buyers will not be forced to sell, many that do will be trading up so will benefit from having less of a step up to make.

As for would be FTBs. How many will spot the trough and buy in 2008, and how many will watch as prices start to rise and end up buying at only 10 or 20% off current peak, or worse still miss the boat a second time?

FF

This kind of assumption makes no sense. There are regions in the UK which are already 8-10% down. There are other regions rising at 8-10% yoy. National averages make no sense.

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Hi,

The last crash was vicious, truely terrible in parts of the country, some valuations in hotspots losing 50% or so on purchase prices. There was a recession but the country did not grind to a halt, people carried on going to work, buying and selling houses, taking holidays, etc. Infact, in my own business, the early ninetees was one of the best boom periods for a few decades as we trade internationally in the large part.

According to CML figures for the era, only around 0.8% of mortgaged-arrears properties were repocessed.

Edited by boom_and_bust

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Those who bought a house as a home, with the intention of living in it and enjoying it for a reasonable length of time will not be affected.

Those who bought a house as an investment, particularly a short term investment - "I must get on the ladder so I will buy this 0 bedroom appartment and when I want a bigger house this appartment will have quadrupelled in value" will be affected.

Anybody who is made redundant will also have probelms.

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Anybody who is made redundant will also have probelms.

Personally, I'd be in quite a strong position - mortgage would be covered by insurance for two years, credit cards and loans will also be paid off by insurance. And a hefty tax-free redundancy payout too. Perfect excuse to go contracting again (or move to Oz).

Edited by Peach

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2003 buyers - will be fine (well, a poor investment but they're on the ladder which means a lot to many people)

2004 buyers - will be 15% down if they sell at trough

2005 buyers - will be 30% down if they sell at trough

Extending this kind of analysis, it is clear that the longer a "plateau" persists, the more people will be locked in to current valuations, and therefore at risk if a crash does materialise. It should also be clear that the political pressure to stop a crash and intervene grows over time, as the number of potential losers increases.

While the government may have been happy to let a bunch of BTL speculators and those with lots of equity lose money, as more and more FTBs buy in to current prices, this will make some kind of bailout more likely.

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Guest muttley

The problem is that if a drop like that were to occur, it would be accompainied by a possible recession, or at best a rise in unemployment.The people who bought near the peak, or who excessively MEWed would be stuck in negative equity, and/or no means with which to pay their mortgage.

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Just got thinking. Let's say prices levelled off in mid 2005 and are now starting to fall, and let's say they will fall 30% in nominal terms over 3 years, before starting to rise. Let us also assume that they were rising at 15% per annum prior to mid 2005.

Forgive me for rounding but -

2003 buyers - will be fine (well, a poor investment but they're on the ladder which means a lot to many people)

2004 buyers - will be 15% down if they sell at trough

2005 buyers - will be 30% down if they sell at trough

How many people does that really affect... not a huge amount in my opinion. Most buyers will not be forced to sell, many that do will be trading up so will benefit from having less of a step up to make.

As for would be FTBs. How many will spot the trough and buy in 2008, and how many will watch as prices start to rise and end up buying at only 10 or 20% off current peak, or worse still miss the boat a second time?

FF

It depends how much deposit people paid and how large a percentage of disposable income their repayments are. If interest rates go up making mortgage repayments unaffordable, and house prices go down meaning negative equity, then there could be big trouble for loads of people, especially those who went down the 'interest only route'.

Of course, loads will be positively affected too. I'd hope for a bigger drop than 30%. Historically house prices have always corrected to three times the average salary. This would require a 50% fall as things currently stand, though wage inflation is bound to account for a bit of that – There won't actually be a 50% fall. Once such a fall has taken place I suspect there will be as many rejoycing as there are repenting... in fact, more may benefit than lose out, as much of the current bubble is short-sighted BTL bulls, leveraged up to the eyeballs with multi-property portfolios. For every one of these who's sunk there's sure to be several wannabe FTBs ready to sail into the sunset on some of the driftwood that's left behind.

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According to CML figures for the era, only around 0.8% of mortgaged-arrears properties were repocessed.

last time they were very few BTL's and last time MEWing wasn't so excessive

This time its not so much what you bought the house for, its what you owe the bank

If you bought in 1996 and have MEW'ed 3 times since, last time being 2003+ chances are you will lose out if forced to sell

Bottom line, too many people are living "property always goes up" lifestyles

Overall the above is still a minority, but its the minority that move the market for better or for worse

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If you bought in 1996 and have MEW'ed 3 times since, last time being 2003+ chances are you will lose out if forced to sell

Particularly if you went the 'executive apartment' route. There's such a glut of the damn things that they'll be given away with boxes of cornflakes by the bottom of the crash.

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It will only affect Idiots who think they are rich because their house increased in value in those boom years and spent accordingly. House prices are not the driver of the economy. It is the level of debt and susceptability to interest rates and economic downturn. If the economy dives its my prospects of earning a living I personally worry about - not whether my house has dropped £30k in value. This may be different, however, if I had bought a £300K house which is only actually worth £200K - a life fekking move.

IMHO - In Bolton prices peaked in 2004. Certainly in my area asking prices are begining to drop - slowly, but surely.

I think some people expect a grand announcement that its started to crash. Not so.

Its quiet but it is definately happening.

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Guest Winners and Losers

OK, I'll trot it out again then.

The person I purchased my London flat off in 1996 was in negative equity. The had purchased it in 1988!

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OK, I'll trot it out again then.

The person I purchased my London flat off in 1996 was in negative equity. The had purchased it in 1988!

ditto our first house in 95. The vendor said 'I paid over £65K for a house you are offering £58K for.'

Tough big boy. Its called market forces.

He accepted the £58K.

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Guest Winners and Losers

ditto our first house in 95. The vendor said 'I paid over £65K for a house you are offering £58K for.'

Tough big boy. Its called market forces.

He accepted the £58K.

The other thing to consider is that they waited almost 10 years!!! and still made no gain.

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The other thing to consider is that they waited almost 10 years!!! and still made no gain.

thats why I think the crash is slowly happening. Now.

Realism is creeping in and the spending spree is over.

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Just got thinking. Let's say prices levelled off in mid 2005 and are now starting to fall, and let's say they will fall 30% in nominal terms over 3 years, before starting to rise. Let us also assume that they were rising at 15% per annum prior to mid 2005.

Forgive me for rounding but -

2003 buyers - will be fine (well, a poor investment but they're on the ladder which means a lot to many people)

2004 buyers - will be 15% down if they sell at trough

2005 buyers - will be 30% down if they sell at trough

How many people does that really affect... not a huge amount in my opinion. Most buyers will not be forced to sell, many that do will be trading up so will benefit from having less of a step up to make.

As for would be FTBs. How many will spot the trough and buy in 2008, and how many will watch as prices start to rise and end up buying at only 10 or 20% off current peak, or worse still miss the boat a second time?

FF

Did prices go up in Stratford East 2004/5? and by quite a lot I can see. WOW.

A proportion of early failures I believe will come from the well over leveraged, non professional BTL brigade. Many of this group will still be in denial when they get their properties and homes reprossed and bancrupcy proceeding started against them. I think there is a bigger proportion of these people than anyone imagines with most with just 2 or 3 properties but some will have several and these properties will hit the market at the same time. This factor could influence the speed and severity of this downturn and effect a much much larger proportion than in 89. Many people will be in negative equity for a very long time and this will effect them mentally. There will be multitudes of false dawns but eventually everyone will be too frightened to buy including myself and others on this site. All IMHO ofcourse

Remember the "ladder", as you put it, changes into a "snake" during a downturn

edit

Stratford East not Stanstead sorry

Edited by Flat Bear

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ditto our first house in 95. The vendor said 'I paid over £65K for a house you are offering £58K for.'

Tough big boy. Its called market forces.

He accepted the £58K.

What makes you any better than TTRTR? At least he's providing a service. You exploited someone who was stuck.

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What makes you any better than TTRTR? At least he's providing a service. You exploited someone who was stuck.

This has to be a wind-up surely?

If somebody is stupid enough to pay £2 for a mars bar, I'm sure as hell not going to pay £2.50 for it. I'll still pay my 40p for it. If that's exploitation then so be it.

All he said was he had made his offer and the owner informed him his offer was £7k less than what he paid. It IS a market, it IS tough but I bet he learned a lesson.

Shares go up and down. Are those who buy shares a 52 week low exploiting those selling at a loss? In literal terms, possibly less, but I think exploitation is a bit too strong a word.

NDL

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This has to be a wind-up surely?

If somebody is stupid enough to pay £2 for a mars bar, I'm sure as hell not going to pay £2.50 for it. I'll still pay my 40p for it. If that's exploitation then so be it.

All he said was he had made his offer and the owner informed him his offer was £7k less than what he paid. It IS a market, it IS tough but I bet he learned a lesson.

Shares go up and down. Are those who buy shares a 52 week low exploiting those selling at a loss? In literal terms, possibly less, but I think exploitation is a bit too strong a word.

NDL

Then quit wingeing (not you personally) about the greed of sellers - it's a market after all.

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What makes you any better than TTRTR? At least he's providing a service. You exploited someone who was stuck.

I have just read this and nearly fell off my (wheel) chair.

Tell you what peach, give me your number and when it all goes tits up I can give a few desperate sellers your details cos I'm sure they would like someone to pay them peak market prices in a slump.

Strewth!

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Just got thinking. Let's say prices levelled off in mid 2005 and are now starting to fall, and let's say they will fall 30% in nominal terms over 3 years, before starting to rise. Let us also assume that they were rising at 15% per annum prior to mid 2005.

Forgive me for rounding but -

2003 buyers - will be fine (well, a poor investment but they're on the ladder which means a lot to many people)

2004 buyers - will be 15% down if they sell at trough

2005 buyers - will be 30% down if they sell at trough

How many people does that really affect... not a huge amount in my opinion. Most buyers will not be forced to sell, many that do will be trading up so will benefit from having less of a step up to make.

As for would be FTBs. How many will spot the trough and buy in 2008, and how many will watch as prices start to rise and end up buying at only 10 or 20% off current peak, or worse still miss the boat a second time?

FF

I think the number is even less than your figures suggest in that if you are trying to sell at a lot to trade up, you will also buy at a reduced price so will benefit rather than be disadvantaged.

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Personally, I'd be in quite a strong position [if made redundant] - mortgage would be covered by insurance for two years, credit cards and loans will also be paid off by insurance. And a hefty tax-free redundancy payout too. Perfect excuse to go contracting again (or move to Oz).

I've made made redundant twice in the last five years. Both times I've walked straight into a much better job, on much better money, and chucked a great big chunk of tax-free cash at my mortgage both times.

Apart from buying my first place in 1997, redundancy has been the best thing that has ever happened to me financially.

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  • 302 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%



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