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AvidFan

Extreme Optimism Meets Extreme Pessimism

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http://www.moneyweek.com/file/51629/credit...even-lower.html

Credit crunch will send markets even lower

05.08.2008

First published on 31/07/08

.../

Looking back at the 1970s gives an insight into what might happen today. Then, when purchasers applied for a mortgage, we would advise them to insure the property for more than it cost to buy it. Initially this may have seemed illogical because the purchase price included land. However, this is how severe it was then - houses were being sold for less than it cost to build them. I remember telling buyers, then, that they were “Buying the house for than less than it cost to build and the land was thrown in free.”

If, as we believe, the developing economic conditions today are worse than they were then. And the credit expansion that ended last year was more insane than the credit expansion that preceded the 1970s slump. Then to get some idea of where the property market could go, consider today’s rebuilding cost of your house, knock off 10%, and you have an idea of the scale of the problem and why houses are not selling at today’s prices.

.../

:o How does that fit with a 30% increase in prices by 2012??

Edited by AvidFan

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http://www.moneyweek.com/file/51629/credit...even-lower.html

Credit crunch will send markets even lower

05.08.2008

First published on 31/07/08

:o How does that fit with a 30% increase in prices by 2012??

So by that reckoning, the house I'm renting is worth about £20k. Someone on here said that a house should cost no more than 6 months wages. Could be a reality by 2012.

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So by that reckoning, the house I'm renting is worth about £20k. Someone on here said that a house should cost no more than 6 months wages. Could be a reality by 2012.

the cost in materials to build an average house is about 60k, the rebuild cost including labour is probably more in the region of 100->120k depending on if you need to demolish anything first. ie average cost 80->100k....

Edited by moosetea

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I think that article mentions that there aren't enough transactions taking place at the moment to properly value houses.

Prices are set at the margin. If the number of sales keeps falling, we could see some ridiculous reductions as a result of negotiations between handfuls of desperate sellers and slightly fewer handfuls of uninterested buyers...

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the cost in materials to build an average house is about 60k,

60k to knock up a 2 bed new build? This house was 40k new around 12 yrs ago. You sure about that moose?

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60k to knock up a 2 bed new build? This house was 40k new around 12 yrs ago. You sure about that moose?
er

60k for the materials to build an AVERAGE self build house (3/4 years ago), but material costs might have gone up since then. A smaller house would be cheaper. I believe that 12 years ago in 1996 houses prices had fallen below the price of materials to rebuild at them. There are calculators on-line if you don't believe me

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60k to knock up a 2 bed new build? This house was 40k new around 12 yrs ago. You sure about that moose?

I found this, in regards to house build costs:

Click below for detailed prices House size Price Range* Units Last updated

All materials 3-bedroom £72460 per house 2007-10-19

All materials 4-bedroom £78400 per house 2007-10-19

whatprice

Building prices for house building total labour: Disclaimer Detailed Description of Work Price/Cost Units Location Last Updated

Large 3-bed, detached, integral garage, 155m^2 £59,300 house Cambridge 2007-10-19

4-bed, detached house, 190m^2 £64,125 house Cambridge 2007-10-19

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I found this, in regards to house build costs:

Click below for detailed prices House size Price Range* Units Last updated

All materials 3-bedroom £72460 per house 2007-10-19

All materials 4-bedroom £78400 per house 2007-10-19

whatprice

Building prices for house building total labour: Disclaimer Detailed Description of Work Price/Cost Units Location Last Updated

Large 3-bed, detached, integral garage, 155m^2 £59,300 house Cambridge 2007-10-19

4-bed, detached house, 190m^2 £64,125 house Cambridge 2007-10-19

This all sounds about right to me then. For a 3 bed, 72K materials + 60K labour = 132K. Minus 10% gives 119K.

Predictions of house price drops are around 30% from peak, or 50K off today's price, etc, etc. These predictions provide estimates of around 130K for the average house, so 119K is the pessimistic result.

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This all sounds about right to me then. For a 3 bed, 72K materials + 60K labour = 132K. Minus 10% gives 119K.

Predictions of house price drops are around 30% from peak, or 50K off today's price, etc, etc. These predictions provide estimates of around 130K for the average house, so 119K is the pessimistic result.

It's a perfect illustration of the fact that land value is a residual amount and that investing in land is a risky investment. This would mean that the UK housebuilders effectively have assets worth zero that they paid billions for. Ouch.

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This all sounds about right to me then. For a 3 bed, 72K materials + 60K labour = 132K. Minus 10% gives 119K.

Predictions of house price drops are around 30% from peak, or 50K off today's price, etc, etc. These predictions provide estimates of around 130K for the average house, so 119K is the pessimistic result.

This could effectively kill off all new builds north of watford gap. Currently 3 bedroom houses in some parts of derbyshire, leeds and other northern towns are going for less than 100,000. Once you take off another 20-30% fall, they aren't going to be able to build any new homes at a profit.

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  • 395 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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