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Negative Equity Without Hpc?

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I've just been thinking about one thread I read yesterday. Sorry, I'm at work and too lazy/busy to find the exact thread to reference it. This thread talked about 1980s semis being of poor quality, and requiring rebuilding soon. As well as 1990s flats being of such poor quality that they would require rebuilding after only 20 years.

Let's just think about what would happen to people who buy these properties even in just a stagnant market. They buy the house at an outlandish salary multiple, meaning that they just scrape by after paying the mortgage. Their introductory rate ends, and they go onto a higher rate. Inflation is not high enough to eat into their mortgage payment, so they're unable to save. After a few years more, they find that their house needs considerable, expensive, work. They can't afford it. They don't have enough equity in their house to pay for the work to be done by MEW-ing. So what do they do.

Here's the kicker. Because the house is now urgently in need of work, even if the market has stayed stagnant and not fallen, they are unlikely to get the price that they paid for it because they bought it as a "good" property, and would need to sell it as a property that needs extensive work. Hence the value of the property has dropped, and they're now in negative equity. Even though the market hasn't.

Possible? LIkely to be rare? Likely to be common?

Billy Shears

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  • 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%

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