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teddyboy

How Do We Determine The Drop In House Prices?

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Here is a quote on another post today: (credit to badger)

Plenty of houses have dropped 20% off their asking price aleady - but not enough to affect the average, yet.

It got me thinking.....

I will continue to save and may at some point be an amateur Property Developer. I mean getting an old house given to us, we put up the capital to get it done and then just pay the present owner enough to cover their mortgage balance and we take on the bills until it sells. But thats another story.....

So on our PLAN we reckon that should have £105K deposit if we sell the crap house and with our savings. So I am comfortable with a £90K mortgage. So about the 200K mark is what we are looking to PURCHASE at. So here is the question.

If we said prices droped 10% in the next 12 months then what can we base this 10% on - The average house price? So it should be about £153K from £170K if we used the Haliwide average? SO this is a 10% drop of the average property.

Now with a slow market, surely they need to drop the prices of the bottom end first to encourage FTB's? So the bottom end might drive the average down with the top end following suit.

So in my predicament I believe that the houses I am seeing for £230K asking price have only ever achieved £200K anyway, so is it 'LA LA LAND' or realistic to assume that if the average house dropeed 10% that we could purchase this for £180?

Subject to seller and all - just in theory?

Or is there a chance that LOWER END could drop by 15%, MIDDLE by 10% and TOP at 5% giving an average of 10%. My purchase is maybe low to middle? So a 12% drop?

Is it going to be based on asking prices? As 10% drop in asking price does not even take a lot of them below the ceiling price anyway. Asking prices between rightmove and selling with HALIWIDE are already about 20% different anyway????

I understand that some areas will drop more than others but I am trying to get to grips with what will be the OFFICIAL INDICATOR of HP Deflation?

TB

Edited by teddyboy

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sto imagining that there will be any fall in house prices. it is not going to happen.

they might be cheaper in a few years.

but thats not a fall in price. they dont happen.

you really must get along with the new way of speaking. everthing is great all of the time. and in four years it will also be great as houses will cost less.

but make no mistake there will be no falls in house prices.

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Its cool.

House prices are becoming more realistic and yes, investors can now buy BMV (below market value) but prices are not dropping..

Not all are actually.

Some are, some are not selling at all, but some sell to captain "Self Cert Interest Only" morron.. so some prices are not selling.

Prices are over the top and only selling to idiots with too much credit.

idiots with too much credit.. are still out there..

Untill the BBC or press tells them otherwise..

"If it's easy to borrow this much it can't be a serious undertaking can it?"

Well, it may be a little serious

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sto imagining that there will be any fall in house prices. it is not going to happen.

they might be cheaper in a few years.

but thats not a fall in price. they dont happen.

you really must get along with the new way of speaking. everthing is great all of the time. and in four years it will also be great as houses will cost less.

but make no mistake there will be no falls in house prices.

aaaaaaaaaaaaaaaah I see - New Labour = New Speak.

So we won't see house price falls, we will see 'slight adjustments in notional or actual values'. That'll cheer up all those MEWers who are stuck in negative equity 'a notional assessment of value to sales realisation discrepancy situation'.

Edited by Mancghirl

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Hi,

There's a few different problems there.

Which index to trust - they do all tend to match up in the end, there's just a lag between asking prices and selling prices. ... So if asking prices drop 20% then the other indices will go down by a similar amount, subject to the usual timelags.

Having said that my reaction to Badger's post was that an asking price falling 20% is not a 20% fall at all. If they were asking 20% more than the recent price for similar property in their area, then dropped back to that price, that's stagnation. If they asked 10% more, then knocked off 20% that's a 10% (or so) fall. If they asked 30% more than the ceiling price, then came down to 10% more, that's a 10% rise etc.

Reductions in individual asking prices are not falls in price, and will happen in a rising or falling market. But a reduction in the average asking price (Rightmove) is a fall in price and should result in a fall in selling price.

But in terms of whether the top end of the market might fall more or less than the lower end I think there are different problems, not least knowing the local market. Last time, low-end properties fell more than high-end. This was because the market became compressed - FTB stuff kept rising after higher priced stuff stagnated, so the gap narrowed as prices rose, then widened as they fell. The same may well happen next time.

So if the £230K asking price (which has only ever sold for about £200K) falls by the average of 10% (in your example) you'd expect to pick it up for £180K or less. But are they more or less overpriced than average (may be worth comparing prices from a few years ago to see how much they have gone up in comparison to the bottom end)? If they are less overpriced in comparison, then yes they may fall less in comparison. Falls are also often marked by a flight to quality - the crap stops selling but the demand for quality housing remains.

No easy answers to this stuff, so I'm only thinking aloud...

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  • 341 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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