Thoughts From A Newbie

[castroses]

Hello

Long time lurker - first time poster!

I've been reading this site for a few months now - a lot of it is very good!

Been thinking today about how a lot of the stuff I've read might relate to my particular street.

It's in a Glasgow suburb, age of houses varying between 60 and 110 years old,semi's and detached 20 houses in all. It's nice - quality even.

Now if GC2 comes along, I'm wondering how my neighbours will be affected - purely as an academic exercise.

Don't think any of them are BTL'ers - maybe it just hasn't caught on in Scotland to the same extent. And most (say 70%) have lived in the street more than 5 years. Mostly professional couples or retired/semi retired and mostly both adults working. (I'm the only singleton) Like I say professionals without BTL so I doubt if more than 20% have done any serious Mewing - if they have it's certainly not for flash cars or anything like that.

SO if GC2 does come along and house prices fall 20/30/40/50% how will they be affected??

Well, my thoughts are:

1. House prices in the street have probably risen >70% since majority moved in so negative equity almost certainly won't apply.

2. Most bought at least longer than 5 years ago at much lower prices so will probably be able to afford the mortgage even if one partner loses their job.

3. No significant mewing been done.

4. No BTL that I'm aware of.

5. Wide spread of jobs/professions (from Warehouseman to Lawyer) so even if economy tanks on a number of fronts, I don't see the whole street becoming unemployed.

Therefore I can only deduce that a 50% crash will have no effect AT ALL on the day to day lives of these people other than the fact their houses will be worth less!

Now either it's an unusual street full of sensible people OR it is in fact an example of what can be expected nationwide - ie even with a 50% HPC, life will go on as normal and the doomsayers out there are on a hiding to nothing!

Interested to hear your thoughts and for anyone else who wants to do a similar neighbourhood analysis!

Cheers!

[misfit]

My area is an area of private flats outside London but still in the SE.

A one bedroom flat recently sold in my block for 139K

This is a rise of 39K since 2003.

Flats were selling at only 112K 18 months ago but since we received the go ahead to purchase the freehold then prices have increased significantly. Without the freehold go ahead I am sure the flats would still be around the 112K mark.

This is because once leasehold flats are less than 80 years old it can become very costly to purchase the freehold and beyond this point the costs only increase further so my area is in demand at the moment.

[kunekune]

There is a good point in this posting, which is that there is not "a house market", there are several different markets and they may not all react in the same way. In my town, there are a lot of newbuild tacky apartments: they have already crashed, of course. Pricesnake shows that a lot of the newbuild houses in crappy parts of town are also in trouble. However, there is a serious shortage of family friendly houses in established areas with gardens priced under £200K: when they come up, they are snapped up, often within a couple of weeks. Then at the other end of the market, the big expensive houses aren't selling well. My guess is that some houses will be affected more than others. But this town will be affected quite badly by a HPC in another way: its major employer is a major building society whose shares aren't doing well. So it could be a double whammy.

[bomberbrown]

In my street, Lambeth SE London. My nextdoor neighbours 1 bed flat just sold for double what she paid for it in 2002. Who the hell can afford £295k for a 1 bedroom flat? (unless they themselves have benefitted from massive HPI).

Then a 5 bedroom house six doors up the road only increased 17% in the same period.

These are all real figures taken from the Land Registry btw, not EA asking prices.

[gilf]

Now either it's an unusual street full of sensible people OR it is in fact an example of what can be expected nationwide - ie even with a 50% HPC, life will go on as normal and the doomsayers out there are on a hiding to nothing!

Have you asked everybody in your street about their financial situation, even if you had I doubt they would have told you, so how can you say there is no MEW, no BTL etc etc.

Anyway that doesn't really matter, a drop in house prices to the tune of 50% would most likely lead to larger economic problems, which in general would result in a recession or at least less spare money floating around the system.

Take for example my parents neighbour, his business went down the pan after the July 7th attacks on London. He worked in advertising, a large portion of his clients were theater promoters and after the attacks tourism dropped off massively, this effected the theater market and the first thing the dropped was advertising budgets. The point is that his office was not bombed, none of his staff or even his customers were physically effected by the blasts but in the end the knock on effect was the end of his business.

It's the same with housing, our economy has become in some part dependant on high house prices while your neighbours may be sitting pretty at the moment a general down turn in the economy could effect them in all sorts of ways. Equity means nothing when you can't pay the mortgage.

[Orbital]

My street? Background: Prob 100 terrace/semi houses. Zone 6 S.London. High average earnings, statistically safe, fast commute to City, 15 mins to countryside. Best of both worlds ! Last terrace to sell was asking circa 200k - dont know what it went for.

When I bought there were always about 5-6 properties for sale, ranging from old dear's moving into care - untouched since the 60s! Through to fully modernised, refitted, re wired etc. I bought one of the latter larger properties for about 200k. In the town I looked at about 20 in our 'class'. Plenty of competition and choice.

But now, a year on, there doesnt seem to be more than one property at a time on, and they seem to go for more.

The point is we see local fluctuations having big differences all the time. Keep your eyes on several areas you like and, realisitc expectations permitting, you will be able to pounce when the time is right. The idea that every house in London (or anywhere in the UK) is seeing massive growth each year is ludicrous and I feel sorry for those who are putting off their goal on this basis.

GL

[castroses]

Gilf

No I have not asked everyone in my street about their financial situations - that would be ridiculous! However I do know many of them well and I was attempting to extrapolate from the situation of the ones I do know.

The point I was trying to make was that for VERY many people in the country (and maybe more so in Scotland, and therefore other area also I'm sure) a massive HPC will have little effect on their lives. Ok houses may become cheaper but if those houses are not going up for sale (and in this example I'm talking 3 or 4 bed mature residential stock) then how is the crash going to precipitate massive changes in the housing market - which seems to be what a lot of the posters on here desire/expect.

Believe me I am a bear - I think the housing market in certain parts of the UK is insane - but there are many many other parts where I don't expect massive changes even after a HPC, if one arrives.

Not every house in the country is going to become suddenly available to the HPCers on here. Some may well do - but will it just be the crappy newbuild flats that BTLers have piled into? Hardly seems to solve the problem does it?

Is that an uncomfortable truth?

[Flat Bear]

Hello

Long time lurker - first time poster!

I've been reading this site for a few months now - a lot of it is very good!

Been thinking today about how a lot of the stuff I've read might relate to my particular street.

It's in a Glasgow suburb, age of houses varying between 60 and 110 years old,semi's and detached 20 houses in all. It's nice - quality even.

Now if GC2 comes along, I'm wondering how my neighbours will be affected - purely as an academic exercise.

Don't think any of them are BTL'ers - maybe it just hasn't caught on in Scotland to the same extent. And most (say 70%) have lived in the street more than 5 years. Mostly professional couples or retired/semi retired and mostly both adults working. (I'm the only singleton) Like I say professionals without BTL so I doubt if more than 20% have done any serious Mewing - if they have it's certainly not for flash cars or anything like that.

SO if GC2 does come along and house prices fall 20/30/40/50% how will they be affected??

Well, my thoughts are:

1. House prices in the street have probably risen >70% since majority moved in so negative equity almost certainly won't apply.

2. Most bought at least longer than 5 years ago at much lower prices so will probably be able to afford the mortgage even if one partner loses their job.

3. No significant mewing been done.

4. No BTL that I'm aware of.

5. Wide spread of jobs/professions (from Warehouseman to Lawyer) so even if economy tanks on a number of fronts, I don't see the whole street becoming unemployed.

Therefore I can only deduce that a 50% crash will have no effect AT ALL on the day to day lives of these people other than the fact their houses will be worth less!

Now either it's an unusual street full of sensible people OR it is in fact an example of what can be expected nationwide - ie even with a 50% HPC, life will go on as normal and the doomsayers out there are on a hiding to nothing!

Interested to hear your thoughts and for anyone else who wants to do a similar neighbourhood analysis!

Cheers!

I would suggest it would have little impact

Property is still relatively cheap, there is no or little extra demand anywhere in Scotland (from other posters) and you have been relatively uneffected by rises in prices.

Any rises that have occured or falls that might occur would be down to percieved values and local speculation as there is no real demand to reinforce any increases.

[downandout]

Interesting question.

I guess what your asking is if everyone in your street woke up tomorrow and the value of their house had halved, what would happen?

Probably nothing and they wouldn't notice, they keep paying their mortgage and keep going to work. House prices mostly effect those entering and leaving the market.

But then there is the knock on effect to the economy, such as a massive reduction in remortgaging and the consequent downturn in spending. A lot of people have been using the increasing equity as a second income.

Maybe the lawyer specialises in conveyancing for remortgages and finds that their out of a job. Maybe there are other people living on the street whose income plummets - estate agents, mortgage advisers, bank employees, surveyors, builders - all of their income is directly determined by the value of house prices rather than just the number of transactions.

They have less money to spend, which has a knock on effect to other businesses (the multiplier effect I believe economists call it). Add to this the reduction in easy/cheap debt and you have a recession that affects everyone. Say the warehouseman works in a warehouse dealing with plasma TVs, less are bought and he's out of a job.

This scenario is based on just a fall in house prices but the fall could just as easily be a consequence of many other economic events rather than the cause.

[Nicholas Cage]

Statistically you live in an unusual street, but even if 1 in 10 houses are in a good situation after a massive downturn, the 90% who aren't will drag you down just the same.

[The Ayatollah Buggeri]

I live just north of York city centre, renting a studio flat in a converted, former mansion. Round the corner is a street of terraced, late Victorian, large houses (three stories - I'd guess each property is 4 or 5 bedrooms at least). About half are still in use as large, family homes, two have been knocked through and are now a hotel, and the rest have been split into one and two-bedroom flats. The two hotels either side of my building have both been converted into flats during the last three years. When I moved here in 2000, the typical price for a one bedroom flat in the buildings near the one I rent was around £100k. At the peak late last year, asking prices were around £200k. From around January-February this year, 'For Sale' and 'To Let' signs started appearing, most of them on the recently converted hotels. The numbers have been steadily increasing ever since.

I think this part of town is going to be hit hard, because York now has a big oversupply of flats and a shortage of larger homes. When I first moved here, I wasn't earning enough and hadn't saved a big enough deposit to buy a flat at £100k. I do now, and, convinced of the inevitability of an HPC, am simply going to bide my time renting until prices return to a sane level. If there are any BTIs or BTLs trying to flog those flats in the ex-hotels, I've a feeling they're going to get their fingers burnt. The property supplement in the local rag is getting bigger, I'm always struck by how empty the EAs' shops are when I walk past them, and the complaints I'm hearing from OO friends about the rising cost of living all suggest to me that, finally, a major correction is about to get underway. But that could be wishful thinking, I guess.

[Sarah Beeny!]

My road and a few hundred yards either side:

NOT including those already SSTC - £495, £475, £499, £525, £575, £700, £747, £750, £1.35m and several others I have not followed.

I have lived here for ten years and have never ever ever seen so many For Sale signs. The norm was one or two a year and then the 'locals' would soon be talking about it and who was moving in.

Something is definately going on. I felt like a pauper living here thinking everyone was cashed up apart from me (relatively). Maybe it was/is all a fascade?

[HPC Convert]

Hello

Long time lurker - first time poster!

I've been reading this site for a few months now - a lot of it is very good!

Been thinking today about how a lot of the stuff I've read might relate to my particular street.

It's in a Glasgow suburb, age of houses varying between 60 and 110 years old,semi's and detached 20 houses in all. It's nice - quality even.

Now if GC2 comes along, I'm wondering how my neighbours will be affected - purely as an academic exercise.

Don't think any of them are BTL'ers - maybe it just hasn't caught on in Scotland to the same extent. And most (say 70%) have lived in the street more than 5 years. Mostly professional couples or retired/semi retired and mostly both adults working. (I'm the only singleton) Like I say professionals without BTL so I doubt if more than 20% have done any serious Mewing - if they have it's certainly not for flash cars or anything like that.

SO if GC2 does come along and house prices fall 20/30/40/50% how will they be affected??

Well, my thoughts are:

1. House prices in the street have probably risen >70% since majority moved in so negative equity almost certainly won't apply.

2. Most bought at least longer than 5 years ago at much lower prices so will probably be able to afford the mortgage even if one partner loses their job.

3. No significant mewing been done.

4. No BTL that I'm aware of.

5. Wide spread of jobs/professions (from Warehouseman to Lawyer) so even if economy tanks on a number of fronts, I don't see the whole street becoming unemployed.

Therefore I can only deduce that a 50% crash will have no effect AT ALL on the day to day lives of these people other than the fact their houses will be worth less!

Now either it's an unusual street full of sensible people OR it is in fact an example of what can be expected nationwide - ie even with a 50% HPC, life will go on as normal and the doomsayers out there are on a hiding to nothing!

Interested to hear your thoughts and for anyone else who wants to do a similar neighbourhood analysis!

Cheers!

It may not have an effect on their daily activity (assuming the economy didn't tank and they are all unemployed etc) - but it would inevitably impact on their financial planning. For example people project what they might leave their kids, what their retirement looks like etc. If that scenario got reduced heavily on account of a HPC then you would see falls in current discretionary expenditure - the new cars and holidays and investments might stop etc.

[Jonnybegood]

Live in a semi rural location 5 miles outside of Cardiff.

Property very rarely comes on the market around here, According to LR only 2 sold within the area in 6 years.

Average price of a cottage £230k Average detached 4 bed £420k. but difficult to establish due to lack of sales

Mainly semi or fully retired - University lecturers , Dentist , Accountant. lived here most of their lives

Don't really think the area will be hugely hit by a HPC, for many of those they would not even know if it happened.

They live in a totally different world, Fishing all day, Potching in the Greenhouse. mowing the lawn.

[HPC Convert]

Live in a semi rural location 5 miles outside of Cardiff.

Property very rarely comes on the market around here, According to LR only 2 sold within the area in 6 years.

Average price of a cottage £230k Average detached 4 bed £420k. but difficult to establish due to lack of sales

Mainly semi or fully retired - University lecturers , Dentist , Accountant. lived here most of their lives

Don't really think the area will be hugely hit by a HPC, for many of those they would not even know if it happened.

They live in a totally different world, Fishing all day, Potching in the Greenhouse. mowing the lawn.

Not likely to be posters on this site then?

[South Lorne]

Gilf

No I have not asked everyone in my street about their financial situations - that would be ridiculous! However I do know many of them well and I was attempting to extrapolate from the situation of the ones I do know.

The point I was trying to make was that for VERY many people in the country (and maybe more so in Scotland, and therefore other area also I'm sure) a massive HPC will have little effect on their lives. Ok houses may become cheaper but if those houses are not going up for sale (and in this example I'm talking 3 or 4 bed mature residential stock) then how is the crash going to precipitate massive changes in the housing market - which seems to be what a lot of the posters on here desire/expect.

Believe me I am a bear - I think the housing market in certain parts of the UK is insane - but there are many many other parts where I don't expect massive changes even after a HPC, if one arrives.

Not every house in the country is going to become suddenly available to the HPCers on here. Some may well do - but will it just be the crappy newbuild flats that BTLers have piled into? Hardly seems to solve the problem does it?

Is that an uncomfortable truth?

Like GC1 the people affected first by a combination of high interest rates and dipping house prices will be those up to their max salary multiples for borrowing, MEWed on top if any recent equity growth and, recently, started a family and dropped from two incomes to one.

No wonder we have such a low population growth.....the young and not so young are scared to start families for economic reasons.

The BTL crowd did not exist at GC1 88/89 but they too will feature heavily this time...more so if interest rates keep rising and GB takes away their tax incentives.

[enrieb]

House prices in the street have probably risen >70% since majority moved in so negative equity almost certainly won't apply.

So if £50,000 house goes up by 100% whats the price?

Therefore I can only deduce that a 50% crash will have no effect AT ALL on the day to day lives of these people other than the fact their houses will be worth less!

and it then falls by 50% whats the price of the house?

Edited June 25, 2007 by enrieb

[South Lorne]

So if £50,000 house goes up by 100% whats the price?

and it then falls by 50% whats the price of the house?

........one thing for sure....if they go up 100% and then fall 100%.....we know it's Armageddon.......!..Game over ....where are the caves..!..?

[South Lorne]

So if £50,000 house goes up by 100% whats the price?

and it then falls by 50% whats the price of the house?

........one thing for sure....if they go up 100% and then fall 100%.....we know it's Armageddon.......!..Game over ....where are the caves..!..?

[South Lorne]

So if £50,000 house goes up by 100% whats the price?

and it then falls by 50% whats the price of the house?

........one thing for sure....if they go up 100% and then fall 100%.....we know it's Armageddon.......!..Game over ....where are the caves..!..?