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Disillusioned

Quality Property Will Be Unavailable During The Crash

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It has been suggested to me that good properties will be very hard to come by during the crash because the mortgage holders will not be selling. I've yet to see any correlation between the quality of the mortgage holder and the quality of the property.

Some choice quotes relating to this subject:

Yup. Just two words: "trailer parks". If you want a trailer park home, then $100 will buy you several. Sub-prime will be a bigger problem there.

By far the majority of people do not have crippling mortgages on quality property. Of those that do, most have perfectly good jobs. They don't get repossessed to the same extent as the trash mentioned above.

I completely agree. If you are rich and can afford it, you'll buy a nice house in an expensive area. Most people living in the prime areas will probably have a low LTV and will be much less likely to be BTL or FTB (since the property is so damn expensive). This means when the crash comes, they won't want to sell for a loss, but will most likely to still be able to afford their mortgages (if any).

Of course there may be one or two in such areas who are the exception, but in general the volumes of sales will just simply vanish.

There are some very desirable areas where there are literally people queuing to buy, it's just that property rarely comes up for sale. So crash or no crash, you can't buy if noone will sell...

I disagree. There are those who want to buy a quality property but probably shouldn't be able to afford it. However, due to the availability of cheap credit, they have been able to afford it, until recently. Therefore, to my mind, there will be forced sales of quality property for those who tried to buy a good place but overstretched themselves.
And then there are the non-doms who are selling up.
I do not disagree that there will be people overstretched, but I feel on the high end of the market, they will be a small minority of homeowners. Remember, during the boom times, the desirable properties would be fought over, and those in better financial standing would be more likely to win a bidding war in the first place. Though of course unforeseen things such as job loss could of course shatter all plans.

I still feel, that given the relatively low mortgage rates (I remember they were around 6-7% back in 98 and it was starting to boom then), unless huge hikes happen, the vast majority will struggle through. Given it is an election year next year, I strongly think that the government will try everything it can to hold off on interest rate rises until after then... :huh:

I disagree. There will always be some top drawer property for sale where the sellers don't overtly mind reducing prices.

I am thinking specifically about where houses are sold on by beneficiaries to a will. Let's face it it tends to be older people who have accumulated the wealth to live in these properties, and the beneficiaries really aren't going to be quibbling about 20%, they just want the money NOW !

The reason for this thread can be found here.

I'd love to hear some more well-reasoned arguments in either direction...

EDIT at 18.08: I should have been more specific. I am talking about the only thing that interests me, and that is quality rather than price. I'm talking about good properties. This is what was suggested would be unavailable during the downturn and I disagree.

Edited by Disillusioned

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It has been suggested to me that good properties will be very hard to come by during the crash because the mortgage holders will not be selling. I've yet to see any correlation between the quality of the mortgage holder and the quality of the property.

I've never seen any correlation. Face it you have had idiots self certing, io mortgages for 100k's, watch a series of property ladder and knock ten bells out of a property with out building regs on the back of HPI. Now can not afford to stay nor sell as they can not get a HIP on the property.

Edited by Letsdance

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I think there is a link between quality properties and quality mortgages although it is not at all uniform. If there was a price crash there would be many many rubbish substandard properties but still a few good ones although I imagine you will have to fight for the good ones still.

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According to government stats during the last crash developers stoped building flats and start building larger properties, ie more 'quality' properties added to the natural chun caused by deaths...

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I think there is a link between quality properties and quality mortgages although it is not at all uniform. If there was a price crash there would be many many rubbish substandard properties but still a few good ones although I imagine you will have to fight for the good ones still.

I suspect you won't have to fight, but won't get amazing knock-down bargains either.

don't forget, credit will also be much harder to come by, there will be less buyers

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There was loads of crap on the market during the last crash but quality properties were still available. If a person with a decent house needs to move and has not remortaged upto the hilt, there is no reason to stay put. They too will benefit from any downturn if they wish to trade up. There will be increased competition on some levels but if credit continues to be hard to come by, there will be less people buying anyway. The most important thing for all genuine FTB's (i.e not people who have owned etc and a ready made deposit) is to ensure they have a deposit. We have been saving (not necessarily for a home but for children, security, deposit etc) for the last 7 years.

No comments about we should have bought in in 2001. I had only recently started out in my career and was on relatively low pay and then we chose to have children rather than a mortgage. Thankfully, our strategy looks like it is going to pay off. With prices the way they were, we were prepared to accept that a 2 bedroom flat would be our lot but not anymore :)

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What is a "lower-quality mortgage holder"? Is it someone with a lower-quality mortgage? If so, the cheaper end of the market will have lots of these people (because they will have lower incomes and probably contain most FTBers and those with less/poor credit history etc). The higher end of the market will contain people with higher incomes and probably more equity.

Are you asking (and I read the thread link you posted) "will the top-end be as liquid as the bottom end during a crash?"

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Presumably the arguments for there being a dearth of good quality properties in the next few years, is based on the last crash?

This is going to be a lot worse, isn't it?

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Guest Steve Cook

There may be an unwillingness and lack of neccessity to sell at the very top of the market, thus potentially holding prices up there. However, I don't think this will apply to the middle of the market downwards. The reason for this is due to the demography of the property owners. The very best houses will, in the main be owned by older, longer term owners who will have paid off their mortgage. The only time such people will want to sell is if they are selling up to go off to sunnier climes or releasing the equity because they are going into long term care etc. What I am trying to get at is that they are unlikey to have a seller above them in a chain. So, if the property isn't attracting buyers at their preferred price, they can simply hold on.

However, everyone below this exhalted position is likely to be part of a chain that goes all the way down to the bottom of the market. Thus, any price drops at the bottom, are going to ripple right up the chain

Steve

Edited by Steve Cook

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Some very very rich people go bankrupt.

And the rich do downsize, and trade up, and die, and have children, and move around. All sorts of property will be available.

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I would put forward the following three reasons why we may see large family homes on the market as well as the "exec" BTL flats:

  • People who purchased in the last three years, have overstretched themselves and can't refinance
  • Marital/relationship breakdown
  • MEWed from main home for BTL "disvestment"

Of the seven £400,000+ houses near where I live (Brampton, Cumbria), two fall into one of these three categories. Both are definitely prime properties and both have been reduced by at least £50,000.

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Guest Steve Cook
Some very very rich people go bankrupt.

And the rich do downsize, and trade up, and die, and have children, and move around. All sorts of property will be available.

Yes...i accept that this may be true even

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Guest Steve Cook
I would put forward the following three reasons why we may see large family homes on the market as well as the "exec" BTL flats:
  • People who purchased in the last three years, have overstretched themselves and can't refinance

  • Marital/relationship breakdown

  • MEWed from main home for BTL "disvestment"

Of the seven £400,000+ houses near where I live (Brampton, Cumbria), two fall into one of these three categories. Both are definitely prime properties and both have been reduced by at least £50,000.

I would put these at the top of the middle of the market. The ones to which I refer are 1/2 million upwards.

Edited by Steve Cook

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I think this will be a very local thing and largely dependant on what has been built there during the boom.

A couple of areas I know have had masses of "executive" homes built... 4 beds with high spec, asking prices £350k +

With "sesnsible" lending, the people buying these would have to be solicitors, GPs, successful small businessmen, mid-high level management etc. You have to ask yourself who is living in them, because they certainly are NOT all people in the above categories.

I've seen a couple of repos, guide price about 50% of what the new-builds were sold as 2 years ago.

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Guest Steve Cook

I would also add that the greatest effects of the credit crunch are going to be felt be the lowest income earners. Thos at the bottom of the housing market as they move onto less favourable mortgage terms. Again, those higher up the income scale will be more able to weather such increases in payments.

Edit: Actually, I don't know if I really believe the argument I am putting forward.... :lol:

They're all stuffed....top to bottom...... :lol:

Steve

Edited by Steve Cook

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I see it like this...

The quality* of property does not reflect the ability of the occupier to pay for it - "We won't make Bob redundant, he lives in a Victorian semi with off road parking for two cars" just doesn't add up. Likewise, decreasing house prices do not (DYIV may be able to prove me wrong on this) reduce the likelihood of occupiers of quality property popping their clogs, nor does it reverse the aging process.

Okay, it's fair to say that a decent four-bed house will generally be worth more than a crap one in the same area, but there are no particular attributes of the former that dictate its owners need or ability to stay in it.

Small anecdotal...

My parents recently downsized, from a rather nice four bed detached in pleasent, quiet area, to a three bed bungalow in the same area. They're happy with their timing (as they made a nice bit of money on the deal), but they would have been downsizing anyway, or at least attempting to, regardless of what the market was up to. They are at that age (in their 70s) where running a decent sized four bed is a waste of money, and dealing with stairs is becoming an increasingly awkward issue, and being devoid of debt they're totally free to move down without any worries. Regardless of which way prices are heading, they were going to downsize.

With additional future implications...

One day, hopefully not for a very long time, my parents will pop their clogs. The property they're in now will then no longer be required by them. Heaven only knows what'll happen to it, but it's a pretty fair bet that it won't just sit uninhabited, and no attempt made to sell it. So, quite regardless of the market conditions when my parents go, that property will become available.

However...

To my untutored eye, what we appear to be seeing at the moment is the head being blown off the housing pint. And, as is the case with so many activities, the head is one thing, but it's not the main event. I can fully understand a non-pressured seller of a genuinely desirably property deciding to put plans for a 'want, not need' move off for a while, just to see how things turn out because, well, things might get better in a few months (not my personal view, but hey...).

Once the main event gets rolling, and we're starting to see some genuine negative effects in the economy as a whole (recession or very low growth maketh forced sales), then things will start to look very different indeed. Recession-proofing of employment and desirability of dwelling don't, as far as I know, have any relationship at all.

* Massively, massively subjective term, that.

(Edited to add...)

Quality, to me, means "a decent property for it's size and type, in a location where people want to live", not just "sumfin wot's really big". If it was the latter, then my argument would have been limited to "People die all the time, I'm surrounded here by magnificent high six \ low seven figure value properties full of pensioners, and a crash is going to stop them dying? I think medical science may beg to differ on that one."... and forgotten all the stuff about forced sellers n' jobs.

Edited by Moo

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Both ends of the market will have mortgaged-owners, and both will be liquid, for different reasons in my view

The owners at the bottom end of the market will be more susceptible to the impact of inflation (cost of petrol, food etc), so might see a greater "push" to sell (cannot afford mortgage when IR go up, or when they go onto SVR etc), Also, this end is always going to have potential FTB snapping at its heels.

The top end may see less of a "push" for owners to sell (they have lower LTV, more stable jobs and probably more savings and disposable income), but the market will still be fluid because the desirable areas are always desirable and someboday will always pay top dollar to live there. Someone always gets rich in a recession (bailiffs, shotgun vendors etc).

bot ends will be fluid, but the crash will hit the bottom 90% of houses, whereas the really nice, £2m plus properties will be largely immune I guess. (footy players don't take wage cuts etc).

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Contradicts my personal experience in 1990 (doing the accounts for a property developer among other things), high end properties fell pretty hard just like everything else. Some low end unsaleable bits simply vaporised but to an extent that didn't reflect the market as a whole.

I think it would be more accurate to mention the fact that the lowest of the low end will simply be unsaleable. Some Manchester flats going down 57% when the crash has barely started points to that.

Here some food for thought on high end markets from this thread:

http://www.housepricecrash.co.uk/forum/ind...t&p=1028595

By 2004, prime "A" property in Tokyo's financial districts were less than 1/100th of their peak

So much for prime being somehow immune because it is prime.

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I think the definition of a 'quality' property is going to change radically during a crash, alot of people may feel like a standard 3 bed semi in hackney or whatever is 'quality' right now and therefore worth whatever ridiculous sum is being charged for it. So, yes I agree there will be considerably less 'quality' about, it's all about the reversal of sentiment.

IMO those who are arguing for there being less of it about during a crash are simply trying to mitigate the imagined impact of any crash on their own lives- will any of you admit to not living in a 'quality' place, or worse, not being a 'quality' mortgage holder?- because lets face it insisting there can be no crash looks pretty damn stupid now.

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I would put these at the top of the middle of the market. The ones to which I refer are 1/2 million upwards.

Here you are.

It was on at £650,000 the first week it was advertised.

Oooh, and we just found out from the HIPS that they bought it for £500,000 in Dec 2006. So the question now is - why do you think your £500,000 house is worth another £100,000 after a mere 15 months? Is it the roll-topped bath? Or did you put in that not terribly nice kitchen? I mean, you must have done something pretty spectacular to expect that sort of return.

Edited by WantHousewithLand

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Just how many of the quality properties are owned by persons whose job will safe from the effects of recession? Me I work in manufacturing (Heavy engineering) in the energy sector so I know that I will always have a job and can always get a job. How many of these "knowledge economy" job are safe? Media? Advertising? Financial Services? iPod sales? Retail?

This downturn looks to make plenty of quality places affordable.

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Two recent articles (possibly already commented on) which write on the same issue...

Shortage of country houses despite housing market slowdown

Credit crunch: Don’t expect to walk into a Georgian pile

I'd say even in the good times it can be hard to find the right place. It took us seven months (as the overall market was peaking :rolleyes: ) to find a house that was right for us to buy... lots around that seemed right at first glance, then fell short on closer investigation. Time well spent though - happy as clams now! :)

Cheers all.

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  • 293 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% +
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      • up 5%



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