Quality Property Will Be Unavailable During The Crash

[Orbital]

People generally spend the most they can to get the nicest place they can. And im talking about normal people who will be debating over getting a 4th bedroom or a drive way - not people with millions to spend who are arguing over a tennis court or a swimming pool!

On this basis, imo, it doesnt matter whether prices go up or down, the "quality" property will only ever be available to the richest amongst us. FTBs arent suddenly all going to be able to afford 5 bed detached houses in prime locations - because there arent enough of them! Only the most well off FTBs will be able to.

Comes back to the old "affordability" argument. If houses now cost £200k but no bank is prepared to lend you 200k then the place may as well be £400k, a million, whatever - you cant have it!!

I think this argument breaks down when you look at flats for example - there are a zillion of them springing up (where I live for example). So far they still seem to be going up and up but even if the oversupply happens I dont see how this will affect the houses I actually want to ultimately buy.

Of course, I hope im wrong, I want that large family home. But my long term plan is to ensure im in a better position to buy than anyone else. A HPC helps me to spend less - great! But if I want to get the nicest houses then I also need to work and save hard.

GL

[Disillusioned]

People generally spend the most they can to get the nicest place they can. And im talking about normal people who will be debating over getting a 4th bedroom or a drive way - not people with millions to spend who are arguing over a tennis court or a swimming pool!

On this basis, imo, it doesnt matter whether prices go up or down, the "quality" property will only ever be available to the richest amongst us.

Or it will be available to those who have access to cheap credit.

FTBs arent suddenly all going to be able to afford 5 bed detached houses in prime locations - because there arent enough of them! Only the most well off FTBs will be able to.

Comes back to the old "affordability" argument. If houses now cost £200k but no bank is prepared to lend you 200k then the place may as well be £400k, a million, whatever - you cant have it!!

...but the banks HAVE been willing to lend the money until now. So there will be lots of good quality properties with unserviceable mortgages, due to the inability of the borrower to pay now that credit has been tightened

I think this argument breaks down when you look at flats for example - there are a zillion of them springing up (where I live for example). So far they still seem to be going up and up but even if the oversupply happens I dont see how this will affect the houses I actually want to ultimately buy.

Of course, I hope im wrong, I want that large family home. But my long term plan is to ensure im in a better position to buy than anyone else. A HPC helps me to spend less - great! But if I want to get the nicest houses then I also need to work and save hard.

GL

[huw]

Why this obsession with money? Downtraded, nohpc and Telometer, you have completely the wrong end of the stick. There are 1-bed houses in the UK that are very good quality (how about a nice cottage in Northumberland or something) and cost nowhere near one- or two-million pounds (even at the moment - let alone in a few years ). There is good quality property in many of the price ranges we're discussing.

I agree with this. I fear we'll be conflating 'quality' with 'executive' next

[The Conveyancer]

NOW, in general, "Quality house" owners tend to be older (see above for reason)

Not only older but wiser.

Not only wiser but they have experience of house price fluctuations

Unfortunately old people are not wiser at all anymore. A large percentage of my work has been Equity Release Schemes. I tell them it is not a good idea, I go through the details and show them why it is a good idea, but they still go ahead.

Old people are just as vunerable to obtaining cheap credit and then just shoving it on a mortgage in one lump sum. Some do this several times.

There was a report today (somewhere, cant remember where to be honest) that more and more people are going into retirement in debt.

[Ignorant Steve]

If you have to ask, you don't know

To me, a quality property is any house you wouldn't want to "move from".

If you were to sell it, it would be because there were good reasons for "moving to" the new place.

It could easily be a rented house but the thing is - if the LL says "out" then you have to go.

NOW, in general, "Quality house" owners tend to be older (see above for reason)

Not only older but wiser.

Not only wiser but they have experience of house price fluctuations

Right , if a "Quality House" owner is going to put their house up for sale when would they sell?

Old people ain't daft - they'll sell it when they think its worth the most. This often means just after the peak.

Unfortunately, they can get it wrong and the house will sit there for ages "Its worth more than that" they sa.

Thats the time when YOU come in - with your bag of cash.....but only after they start to get afraid.

Remember - the nice houses are only for sale when the seller is selling them. It ain;t like "quality" apples from the supermarket.

Most old people in these "quality" houses will only sell when they are physically unable to cope with the property. Irrespective of the property cycle. So there will be a constant supply hitting the market all the time. Memories count for more than money. And who wants to downsize to a "retirement" flat miles from friends and contacts?

All other sources of quality houses (by far the majority) will not waste their time marketing simply to get a derisory offer.

If you already own a quality property you will only trade up to another bigger quality home and the chances of finding one when so few are on the market is a self-fulfilling cycle. Quality home owners simply withdraw from the market both as buyers and sellers.

[gravity]

These owners are in truly frightening levels of debt. If interest rates don't rise to crucify 'em, inflating taxes, energy, food & water prices will. Probably both. And that's assuming they haven't got an interest-only mortgage with no other repayment vehicle.

Spot on.

Just because your house is quality, doesn’t mean your financial situation is. Everyone, as already said, is being hit with higher living costs, taxes, mortgages etc.

Consider this anecdotal:

I have a good friend who maxed out on an interest only mortgage in order to buy a quality barn conversion. Original stonework, open fire, nice garden, lovely village etc. Get the picture? He figures if he spends all his mortgage repayments on an interest only, instead of splitting between interest and repayment he can get a bigger house, which to be fair, is true, only now he’s getting squeezed like never before. Higher fuel and lecky bills and now is coming up to re-mortgaging. How long before the banks start getting insistent about seeing evidence of repayment vehicles?

Now he’s like Alistair Darling. Stuffed with no room for fiscal manoeuvre.

[redwing]

This has been a very interesting thread with some insightful and thoughtful posts.

What I think is missing from this is that nearly all have focused on 'what is quality?' You're all defining the house. It's part of the brainwashing that goes with 12 years of rising values.

Think, instead, of what will happen for the demand for 'quality housing'.

What drives demand for quality homes? Essentially, it's going to be people moving up from 'quite nice really' houses, adding another £100,000 or £200,000 to their mortgage.

Admittedly, there will be some movement between people who live in quality housing - moving for jobs etc.

But, like all other bits of the market, the demand for quality will be underpinned by:

1. what folk can get for their 'really quite nice' places when trading up.

2. the amount of money sloshing around wealthy families (top 5% of earners). How will financial services pay fare in the next two years?

3. what inheritance people are getting (remembering that their aged parents are living in houses that are coming down in value).

4. EXPECTATION; whether people are interested in buying a million pound house if it's likely to falling in value - along with everything else.

imo the demand pressures on the high end are going to pretty similar to those at the bottom.

In a sense: Differentials Will Be Preserved

[edit to add]

5 Jumbo Loans. They are not available in the US now. I reckon they'll be less available here too.

This argument about 'quality' not falling as fast as trash is a lot like "the prices won't fall in my area" argument.

Sure, nice houses will maintain a differential above the ordinary. But they'll fall (or rise) in tandem with other property.

The value of 'quality' is not absolute. It can be only judged in relation to 'not-quality'. If the gap between the two gets too large, then the seekers of quality will be either sorely tempted to plump for the better value; or be in no position to bridge the gap from 'really quite nice' to 'quality'.

The psychological problem for the current owners of 'quality' houses is their discomfort (cognitive dissonance) that their cherished 'home' is worth less than it was last year. It's the only thing that will stop there being sales, but it won't maintain sales at a higher price.

[dances with sheeple]

If you have to ask, you don't know

To me, a quality property is any house you wouldn't want to "move from".

If you were to sell it, it would be because there were good reasons for "moving to" the new place.

It could easily be a rented house but the thing is - if the LL says "out" then you have to go.

NOW, in general, "Quality house" owners tend to be older (see above for reason)

Not only older but wiser.

Not only wiser but they have experience of house price fluctuations

Right , if a "Quality House" owner is going to put their house up for sale when would they sell?

Old people ain't daft - they'll sell it when they think its worth the most. This often means just after the peak.

Unfortunately, they can get it wrong and the house will sit there for ages "Its worth more than that" they sa.

Thats the time when YOU come in - with your bag of cash.....but only after they start to get afraid.

Remember - the nice houses are only for sale when the seller is selling them. It ain;t like "quality" apples from the supermarket.

Any seller who has not sold their "quality" house by now will not be profitting from the just deceased housing boom. There will never be a time in our lifetime when property changes hands for the multiples of salary that we reached recently. The one off credit event that we have witnessed over the last ten years is gone and it is not coming back. If you did not buy low and sell high some time ago, the massive gains do not apply to you anymore. End of story. If you are talking about a situation where money is no option and cash will be paid, fine, that is outwith the universe of most of the people who bought into this crazy idea of property as some sort of unlimited goldmine, but the basics of valuation still apply, no truly wealthy person is going to pay over the odds they consider reasonable in a particular market for any asset, they would soon lose their wealth if they did wouldn`t they? and any wealthy person who is well informed is going to have offloaded any property they wanted gains from some time ago aren`t they? Even if you are John Paul Getty, one persons quality home is another persons nightmare, it might be too near the sea, too far from the sea, haunted, not the same since your wife/husband/children left

not inspiring you anymore, whatever. At the end of the day property is just a space to live in,and you get the best you can afford? Quality

property will still be in demand, it will just be cheaper, but still out of reach of the sheeple. Have you seen the house Warren Buffet is supposed to call his main residence? If it was posted on here people would be laughing and calling it an overpriced shithole! but he bought it very cheap and presumably likes living there? The problem is that the sheeple have been playing at being wealthy, and the banks have been glad to assist. many people are going to be pleasantly surprised at the quality that is soon coming their way at favourable prices.

[Downtraded]

property will still be in demand, it will just be cheaper, but still out of reach of the sheeple.......

....The problem is that the sheeple have been playing at being wealthy, and the banks have been glad to assist. many people are going to be pleasantly surprised at the quality that is soon coming their way at favourable prices.

You're right to say that quality is coming but don't make the mistake that this situation will hang around.

My comments arise from having lived through 2 downturns as a home owner wanting to trade up.

I'm sure that the combination of the age profiles and the state of the economy had an effect; but 3 years after the first downturn started, I found that there were no "decent" properties I wanted to trade up to.

The owners seemed to be hanging on to them - all that was left were badly situated houses or 3 bed semis .

It took a good few years to find something we liked and in the mean time, we didn't put our house up for sale. A catch 22 situation - a log jam if you like because the house we were selling was quite nice anyway!

[Sour Mash]

On the contrary, I think the great tragedy of this boom has been that at a time when people have been willing to invest more money than at any time in history in property, they haven't demanded a commensurate increase in quality.

Recent new builds ought to have been stunning.

Too true - but for many people the pride they got from their property was how much money they had 'made' on it, not how well crafted and constructed it was.

Once prices reach the crazy boom levels that they have it's only too logical for the developers to push properties out as quickly as possible to maximise their profits. What a tragic waste. For 200k you should be able to have an absolutely fantastic house not some crappy Barratt rabit hutch on a tacky estate in a flood plain. :angry:

[huggybear]

I've an annecdotal which might help. I know a lovely couple with great jobs who have a smashing house. It was valued last year at 760k. Unfortunately they're on an interest only mortgage - currently at 4.3%, which is about to reset.

Sure, they have a chunk of equity but they have MEWed and I'd guess they're owing around 400k still. They know they've got a payment shock coming and if you do the maths from 4.3 to say 5.5% that's quite an uncomfortable extra £400 to find every month. So they are looking for something a little cheaper at around 600k.

That means, obviously, they need to find a buyer who can come up with the 760k they are looking for. There are then three types of buyer as far as I can see.

1. People like them looking to downsize. That leaves a more expensive house looking for a buyer.

2. People moving location into a similar priced house. So a same value house comes onto the market.

3. People looking to upsize. That means a cheaper house comes on the market.

Of course there is a 4, people coming from rented accomodation, but I can't imagine many renters jumping into that end of the market.

I'm guessing that there will be more 1s and 2s than 3s in the current downturn. When the bottom falls away there won't be much holding the top up. I think the top of the market will suffer as badly if not worse once the crash gets underway.

[jammo]

I remember hearing on BBC Watchdog this week (yeah sad, I know) that 40% of new build houses don't meet the BASIC standard for energy efficiency, officially. Is this part of the problem re lack of quality? Or is it the general ugliness of new builds which strikes me as monumental and insidious in it's blight.

[Zadkiel]

Is this part of the problem re lack of quality? Or is it the general ugliness of new builds which strikes me as monumental and insidious in it's blight.

Well IMHO it is the non-soundproof plasterboard internal walls, creaky fibre/chipboard floors, tiny en-suites, cheap double-glazing, cardboard internal doors, pathetic lack of storage space, bedrooms that require flat-packed furniture 'coz you can't get fully assembled pieces up the stairs) unboarded attics, feeble boilers, irritatingly placed faux fireplaces and solitary confinement/prison-yard sized back gardens with tons of builders' rubbish burried beneath rye-grass mix turf and garages designed for anorexic mini-cars.

Oh and the b****y door knockers/handles etc seem to be made from easily tarnished cheap cr*p too.

Rant over

[Disillusioned]

You're right to say that quality is coming but don't make the mistake that this situation will hang around.

My comments arise from having lived through 2 downturns as a home owner wanting to trade up.

I'm sure that the combination of the age profiles and the state of the economy had an effect; but 3 years after the first downturn started, I found that there were no "decent" properties I wanted to trade up to.

The owners seemed to be hanging on to them - all that was left were badly situated houses or 3 bed semis .

It took a good few years to find something we liked and in the mean time, we didn't put our house up for sale. A catch 22 situation - a log jam if you like because the house we were selling was quite nice anyway!

I see what you're getting at: an abundance of good quality properties are likely to be on sale at the time during the crash when there are the most forced sales. After the peak in forced sales, there will be fewer because the rest of the owners are just about keeping up with their payments.

Right?

Or maybe these forced sales will be distributed quite evenly over the crash period as each mortgage reset comes through... hmmm.

[Sledgehead]

Quality Property Will Be Unavailable During The Crash, discuss

Would love to, but clocks are fwd & Edmund Conway has already addressed this here:

"... All of which leads me to conclude that prices in the smart property market may be set for a fall -perhaps even bigger than the rest of the market."

[Nicolaj]

Would love to, but clocks are fwd & Edmund Conway has already addressed this here:

"... All of which leads me to conclude that prices in the smart property market may be set for a fall -perhaps even bigger than the rest of the market."

Good artical, probably because this is what I was thinking myself..

I think how you look at this depends on how bad you think this crash is going to be and how bad things are going to get.. I believe this crash will be like nothing we've ever seen before...it will hit everyone..including the rich...and famous. Few will escape it's effects.

There was no distinction between rich and poor in the GD1 there won't be this time either.. GD1 will have seemed like a breeze.

time will tell.

[redwing]

Would love to, but clocks are fwd & Edmund Conway has already addressed this here:

"... All of which leads me to conclude that prices in the smart property market may be set for a fall -perhaps even bigger than the rest of the market."

Mr Conway also debunks the 'Rich Russians' are coming to keep up prices.

I think that once prices start to fall rich Russians will find something better to put their money into.

Who's going to invest in a falling asset class for several years? Not rich oligarchs. They didn't get rich with that kind of investment strategy and they're unlikely to change now, are they?

[huw]

Would love to, but clocks are fwd & Edmund Conway has already addressed this here:

"... All of which leads me to conclude that prices in the smart property market may be set for a fall -perhaps even bigger than the rest of the market."

As Silver Surfer pointed out, there are good and bad properties at all price levels.

[Guest vicmac64]

This is just simply wistfull thinking - remember the bull property owners thought this one would never end and they were buying accordingly - now the banks are goin to come a calling.........................