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How Low Must House Prices Fall

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I'm not sure whether this has been asked before. However, here goes.

I would hazard a guess that there are a number of bears, on this forum, that would like to purchase a house at some stage. However, houses are poor value for money at this point in time. I have also noticed a few people , in recent weeks, who have 'throw in the towel' and purchased a house.

Heres the question.

What percentage reductions (real terms) would house prices have to fall in order to entice you back into the market?

For me, it would be 40% minimum. However, I think that it may be ten years or so before we reach this point since I do not expect to see a proper crash for two or three years yet.

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I'd be quite happy with 30% down, ie a house that sold for 500k selling for £350k

Over a 5 years period, with wage inflation at about 4%, would bring prices down 50%. Of course at that point, when houses are once again good value, everyone will be telling you that buying is a bad idea.

It's been cyclical for centuries, and nothing's changed.

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[

Over a 5 years period, with wage inflation at about 4%, would bring prices down 50%. Of course at that point, when houses are once again good value, everyone will be telling you that buying is a bad idea.

It's been cyclical for centuries, and nothing's changed.

I totally agree with you. Why are we so locked in to this mentality. We continuously delude ourselves it will be different this time. Its only in hindsight we tell ourselves it had to happen. I thought humans were supposed to be intelligent creatures. when I think of your example about the £500k house. How on earth is anybody going to repay the capital ?? let alone the interest when rates rise as indeed they must when the excess liquidity runs out

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That's a 50% crash then.

WOW :o

For what its worth, for me to trade up I'm looking for a 40% fall from top to bottom. ;)

Yes, I don't think that a 50% crash, in real terms is unrealistic. When House prices are measured aganst average earnings, they will have to fall by that much to bring them back into line with the long term trend. Some poorer quality areas may see falls much larger than 50%. A recent example of such a crash is Japan.

However, I don't believe that a proper nationwide crash has started yet. When it does, it is likely to be accompanied by a long and deep recession. It may be two or three years yet before this starts and several years after that before the big falls are realised.

It may be a long haul, but I think that it's worth waiting.

----------------------------------------------------------------------------------------------------------------------

In the current economic climate, Houses are poor value for money.

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Seems to be a bit of confusion about nominal/real terms on this thread. I reckon we could well see a fall in real terms (I hope so), but not much in nominal terms.

The post that mentions wage inflation over a period of years is probably how it will pan out. The trick for anyone priced out would be to stay out of debt and keep saving (probably your only hope) and perhaps you'll find yourself in a position to buy in a few years time. I think what's damaging many FTBs chances are going out spending the money and not quite understanding how they can beat the system over time.

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I'll buy when a decent two-bed apartment is no more than four times my salary. In the meantime I'm saving as much of that as I can so more is deposit and less is mortgage. I hope to borrow no more than three times my salary.

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There are two separate questions here:-

(i) how much do you think it will crash by?

For me, the answer is "a lot over a long time but different amounts in different areas". There won't be a uniform 30% or 50% all over.

(ii) what dip is required before I take the plunge?

I would be happy with 20% off. Even if I lost 10% off that over a few years I wouldn't be too bothered. The fact is that, if there were a crash, there would be a period of rapid losses but the bottom would take many years to achieve. I can't be bothered waiting so long. I need to live my life - for my family's sake.

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I'm not sure whether this has been asked before. However, here goes.

I would hazard a guess that there are a number of bears, on this forum, that would like to purchase a house at some stage. However, houses are poor value for money at this point in time. I have also noticed a few people , in recent weeks, who have 'throw in the towel' and purchased a house.

Heres the question.

What percentage reductions (real terms) would house prices have to fall in order to entice you back into the market?

For me, it would be 40% minimum. However, I think that it may be ten years or so before we reach this point since I do not expect to see a proper crash for two or three years yet.

I would buy when this site will be closed down.

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In my case it's not how much prices must drop before I buy as how much I need save for a deposit. Given a sensible borrowing ratio of 3.5x I can borrow around £105K. Average houses(*) in Norwich are £168,785 according to the Halifax (down 4% YOY), meaning I would currently need to stump up a deposit of £63,785.

The thing is I'm from the North (County Durham, for all you Wearsiders on here), and I've only a few things keeping me here in Norwich. I can currently buy a house around where I grew up for £80,000 and immediately be back amongst old friends and family. So long as I've a roof over my head I can quite happily take the inevitable cut in pay, particularly with a mortgage of only £25,000 (the minimum mortgage most lenders seem to issue nowadays).

Now for the crux of the matter - given the number of hooks I've got into my place of work, and the fact that the owner of the firm considers me something of a goldmine, the unnecessarily high house prices in Norwich suddenly becomes a problem more for my employer than for me...

As anecdotal as my experience may be, this is now a sign of our times. When a whole generation is priced out of housing through the greed and speculation of others and a rentier society forms, local business can and will be undermined when they can no longer retain their key staff.

Just bear that in mind.

Kind regards

Cheston.

(*) The bulls on this site may witter "But you don't buy an average house to start with, you buy small and trade up later on." Etc, etc. So what? After hitting the big three-oh last year I'm frankly not interested in a one-bedroomed flat. Call me picky if you must but in my opinion it's a bit late for that now.

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Guest grumpy-old-man

In my case it's not how much prices must drop before I buy as how much I need save for a deposit. Given a sensible borrowing ratio of 3.5x I can borrow around £105K. Average houses(*) in Norwich are £168,785 according to the Halifax (down 4% YOY), meaning I would currently need to stump up a deposit of £63,785.

The thing is I'm from the North (County Durham, for all you Wearsiders on here), and I've only a few things keeping me here in Norwich. I can currently buy a house around where I grew up for £80,000 and immediately be back amongst old friends and family. So long as I've a roof over my head I can quite happily take the inevitable cut in pay, particularly with a mortgage of only £25,000 (the minimum mortgage most lenders seem to issue nowadays).

Now for the crux of the matter - given the number of hooks I've got into my place of work, and the fact that the owner of the firm considers me something of a goldmine, the unnecessarily high house prices in Norwich suddenly becomes a problem more for my employer than for me...

As anecdotal as my experience may be, this is now a sign of our times. When a whole generation is priced out of housing through the greed and speculation of others and a rentier society forms, local business can and will be undermined when they can no longer retain their key staff.

Just bear that in mind.

Kind regards

Cheston.

(*) The bulls on this site may witter "But you don't buy an average house to start with, you buy small and trade up later on." Etc, etc. So what? After hitting the big three-oh last year I'm frankly not interested in a one-bedroomed flat. Call me picky if you must but in my opinion it's a bit late for that now.

what do you do for a living if you don't mind me asking ?

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I don't mind at all. Officially I've been an IT manager for the last nine years. Being part of a small company, however, means that we all have umpteen other jobs within the firm. Through a little bit of luck and a lot of hard work I've made it so that the extra facets of my job are rather valuable to the firm (i.e. I earn far more for the firm than I spend - unheard of in IT circles!). I'm not arrogant enough to say I'm irreplaceable, but, for the firm, it would be a real pain in the pods for me to leave. So the annual Risk Analysis goes, anyway...

According to the Annual Survey of Hours and Earnings 2005, however, it transpires that, despite being key to the firm, I'm paid around the 35th percentile for my industry here in Norwich. This has peeved me somewhat given the amount of effort I put into the job(s!) and the fact I'm managing computer systems a mite more complex than a bunch of checkout tills at Tesco. Therefore my previous post is one of the angles I'll be putting forward in my upcoming pay review in order to try and put this right.

Huzzah! My 100th post!

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The bulls on this site may witter "But you don't buy an average house to start with, you buy small and trade up later on." Etc, etc. So what? After hitting the big three-oh last year I'm frankly not interested in a one-bedroomed flat. Call me picky if you must but in my opinion it's a bit late for that now.

Couldn't agree more. I'm in the same age bracket, and whilst the novelty of a city centre pad may have been ideal 5yrs ago, (loft living - pleeeeaaase!) I'm too old for messing about in a shoebox now. at 31 I want to own something with a bit of room, and a bit of garden, and in such an area so I do not get stabbed when I walk out the front door. I don't think this is unreasonable as I am on a good salary.

As the average FTB age is now 34, I've still got 3 yrs left to go, and people are wondering why women are having kids at 40!

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I have no particular desire to buy but I would consider it if the economics made sense. It just seems crazy buying a house when the rent comes to less than 6%. Mortgage interest is just money down the drain these days because house prices have got nowhere to go but sideways or down. And any capital you have put into the property is just dead money these days.

The other thing I don't like about property are that there are risks. Prices are too high, interest rates are creeping up, Gordon Brown is talking about at capital gains tax for property and, from what I can see, virtually all the new jobs created over the past ten years have been funded by the tax payer. This is going to screw the economy at some point.

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I will consider buying when I can afford to buy a house. Until prices fall to a level that I can manage on my wages - then I have no choice but to rent.

£50,000-£80,000 would be realistic for me. The area I live in this would be around a 50% fall.

Clangnuts

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Like everyone else, I want a family home for 2.5 times our joint salaries or 3 times his. At the moment 4 bed semi's are £335ish in nice parts of chester or £450 in stratford upon avon, the two area's I would buy in.

It's all very depressing.

BTW one of the sales people in our company (fmcg) will be recieving a 1/4 bonus cheque of £22k on top of his salary at the end of this month. I think there's still a long way to go before this crash will gain any momentum.

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I'd be quite happy with 30% down, ie a house that sold for 500k selling for £350k

Over a 5 years period, with wage inflation at about 4%, would bring prices down 50%. Of course at that point, when houses are once again good value, everyone will be telling you that buying is a bad idea.

It's been cyclical for centuries, and nothing's changed.

Absolute spot on - my thoughts exactly!!!

TB

I believe its WELL ACHIEVABLE!!!

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I'm not sure whether this has been asked before. However, here goes.

I would hazard a guess that there are a number of bears, on this forum, that would like to purchase a house at some stage. However, houses are poor value for money at this point in time. I have also noticed a few people , in recent weeks, who have 'throw in the towel' and purchased a house.

Heres the question.

What percentage reductions (real terms) would house prices have to fall in order to entice you back into the market?

For me, it would be 40% minimum. However, I think that it may be ten years or so before we reach this point since I do not expect to see a proper crash for two or three years yet.

10% rise.

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Everyone on this website focuses on a "real" fall in house price values on this website a great deal.

I have been expecting (hoping?) this this will happen for at least the last 2 years.

Large parts of the rationale for working out long term house prices stem from the earnings to property price ratio - usually seen as c.3 x earnings or so.

I guess the average salary is supposed to be 25k p/a which makes a mockery of this ratio at present.

Is it not more likely that wages will now rise at least 5 - 10% year on year and house prices remain static?

(Albeit I wonder where on earth the profits will come in many of the UK's saturated or overly commodotised markets)

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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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