Tuesday, Jun 02, 2020

Here we go.

BBC News: House prices see largest monthly fall for 11 years, says Nationwide

Prices down 1.7% in may according to NW. The Biased Broadcasting Corp can't quite bring itself to report this simply as a fall however, choosing to describe it as a halving of annual growth.

Posted by nickb @ 09:02 AM (4311 views)
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20 Comments

1. magnifico said...

From the article: "These same measures should also help ensure the impact on the housing market will ultimately be less than would normally be associated with an economic shock of this magnitude," he predicted.

Why is it that of all the consequences of an economic downturn house prices seems to be the sacred cow that cannot be affected. Poverty, foodbanks, social deprivation etc.are all fair play.

Tuesday, June 2, 2020 10:43AM Report Comment
 

2. nickb said...

probably because the money supply largely consists of credit issued as mortgage debt. Lower prices in these circumstances exacerbates macroeconomic contraction. the price paid for less and less emphasis on productive activity as opposed to speculation and rent extraction.

Tuesday, June 2, 2020 11:31AM Report Comment
 

3. nickb said...

Looking forward to the beeb talking about a halving of decadal growth however...

Tuesday, June 2, 2020 11:33AM Report Comment
 

4. tenyearstogetmymoneyback said...

Moneywise is predicting falls for the rest of the year

https://www.moneywise.co.uk/property/everything-you-need-know-about-post-pandemic-property-prices

What no one seems to be considering is what happens when sentiment turns negative. The most common cause f deflation is people holding off buying because they expect prices to drop. It then becomes self fulfilling. In 1995 the only people buying houses were people buying them in the same way as cars. useful but something you were likely to lose money on.

Tuesday, June 2, 2020 10:56PM Report Comment
 

5. khards said...

The US keeps stocks pumped up and likewise the UK keeps housing propped up. It's mostly for appearance that all is ok.

With 0% interest rates, unfortunately I don't see asset prices falling too far but there could well be a dip with a few forced sellers need to sell at any price.
O should think auction results would be interesting

Wednesday, June 3, 2020 08:36AM Report Comment
 

6. nickb said...

@5 but interest rates have been near zero for a long time, whereas now there is a big change on the cards with lower incomes and mass unemployment, as per the article. If rates go appreciably negative, this causes problems for the banks. .All of which will also impact on "sentiment".

Wednesday, June 3, 2020 09:30AM Report Comment
 

7. nickb said...

@5 compounding this big change is of course Brexit. Fun times.

Wednesday, June 3, 2020 09:36AM Report Comment
 

8. mombers said...

We completed the sale of our flat literally on the last day before lockdown and are renting now. We've had an offer accepted on a house now. You'd think it would be worth taking a gamble that the gvmt will actually let prices fall and then pick up something nicer for less in a year but the gap between mortgage interest and rent is so huge that house would have to fall in value by more than 10% over the 5 year fixed rate mortgage term for renting to be cheaper. We're intending to live there for at least 13 years so don't really care what happens to prices. In fact if after 13 years it's worth the same that's great as my kids will have a much easier time paying for housing than if it keeps going up and up

The people we are buying from are having to downsize to get their kids on the 'ladder' FFS. If their house hadn't tripled in value they wouldn't be in such a position and their kids would have more money to spend on living...

Thursday, June 4, 2020 10:34AM Report Comment
 

9. libertas said...

There were talks of 18 million people entering UK during lockdown. Many will be front-running border closures and now Boris is offering 3 million passports to Hong Kong residents. It is possible, along with all the money printing that property surprises.

Also, with everybody locked up at home, people are valuing property more than ever. Properties with great amenity and space may surprise us in terms of value.

Thursday, June 4, 2020 10:46AM Report Comment
 

10. stillthinking said...

Back in 2006 everybody on this site thought that there would be a crash, but there wasn't because of at the time unprecedented quantative easing maintaining nominal values. You can see the crash in gold very clearly though, as the housing bubble peak in gold was really quite something, astonishing, peaking at 700 ounces.

However, at the beginning of coronavirus it was around 200 the long term average, and there has been ongoing QE, interest rate suppression and government thin air spending comparable to WW2. You can see the levitation in stocks.

That entirely aside, why everybody was wrong footed before, was because previously house price crashes had been allowed to proceed.

Now UK outstanding mortgage debt is at an all time high.
https://themoneycharity.org.uk/money-stats-outstanding-mortgages-hits-time-high-uk/
Does anybody seriously think the UK government will allow a cascading spiral of debts to hit the banking sector along with unemployment? No. There may well be some short-term fluctuations but the question isn't in a fair marketplace will prices fall or rise, the question is do you think the government will allow a rout in housing? The answer is surely no. There are already the usual feeds in the press about temporary relaxation of stamp duty and where does everybody think the furlough money has gone? Half of furlough money went on rent, a bailout of landlords.
https://www.scotsman.com/news/politics/almost-half-uk-furlough-scheme-will-be-spent-rent-debt-repayments-2851137

Thursday, June 4, 2020 11:19AM Report Comment
 

11. stillthinking said...

Sorry to double post, but I forgot to mention unemployment benefit. Which is 450/month, but what is the corresponding amount for housing benefit for the unemployed?
https://lha-direct.voa.gov.uk/SearchResults.aspx?LocalAuthorityId=13&LHACategory=1&Month=6&Year=2020&SearchPageParameters=true

For a one bedroom flat in Hammersmith London, the government will pay 1200/month to your landlord if you become unemployed.

Thursday, June 4, 2020 11:26AM Report Comment
 

12. landofconfusion said...

@stillthinking

Absolutely. Sentiment may have taken a hit but right now people don't need to sell and that lack of pressure coupled with government support will most likely mean that any falls will be modest at best.

And to add to that the daily email's I've been getting from Zoopla have only supported this theory. The only falls I've seen have come from either wrecks which were bafflingly first offered at market average, homes with unfixable structural issues (30°+ sloping garden anyone?) and homes located an unacceptable distance away from motorways & employment. Everything else is either flat or slightly higher.

Thursday, June 4, 2020 02:20PM Report Comment
 

13. mombers said...

@stillthinking great #10 + #11. What exactly does a Hammersmith landlord do so much better than a Scunthorpe one that justifies the taxpayer shelling out £1200 vs ~£400? Particularly galling is when the Hammersmith landlord is the proud owner of a fire sale Right To Buy and is then renting to the public at 3x the cost of the identical one next door that the council covers its costs on at a much lower rent. Thatcher (and her only mildly less enthusiastic RTB Labour counterparts) didn't think this through. You either have to provide massive subsidies to private landlords or force low to middle income people to commute long distances to work.

Thursday, June 4, 2020 04:31PM Report Comment
 

14. tenyearstogetmymoneyback said...

Good Luck Mombers.

I wonder if you will continue to post here.

As I might have said in the past, after being forced to moved three times in three years I gave up on renting and bought my own place in 2011. That was when getting a mortgage still involved a two hour interview, and according to the bloke from the bank, having a repayment term that went after I'm 65 would have required a much longer essay from him.

Why am I still posting nine years later? The wild swings in house prices have probably had more effect on my life than anything else. Ten years when I couldn't sell without taking a loss, followed by ten years in which saving £100000 still wasn't enough to allow me to buy (without resorting to a liar loan) where I was living.

Anyway I hope you have picked a house you will be happy in for the next 13 years.

Thursday, June 4, 2020 11:42PM Report Comment
 

15. mombers said...

@tenyearstogetmymoneyback I'll def continue posting :-) I was an owner occupier for 6+ years until this year and didn't drink the Koolaid once... Artificially high house prices can never be a good thing. Rising prices are no good either - it just makes it harder for people to move to better homes. Imagine a situation where all your equity comes from adding value to the economy and paying down your mortgage with the proceeds, rather than a windfall unearned that is eclipsed by the bigger windfall that your seller got. Case in point is our move. £100k+ equity gain from rising prices, house we are buying £150k+. So a very clear £50k impairment to our position. So frustrating that most people look at the £100k+ and ignore the £150k+

Friday, June 5, 2020 10:08AM Report Comment
 

16. nickb said...

@11 @12
It;s already happening. You're not accounting for the fact that this time incomes are already down and falling, and unemployment is already up and rising, so everyone is a riskier prospect for a lender, plus interest rates are already near zero. Even last time, which was less severe, there was 25% real terms reduction. And we're not at Brexit yet.
They can't let it happen, true, but I doubt that this time they can stop it.
Incidentally, I'm not sure what sense it makes to compare a house price to a precious metal, itself with a volatile price because of speculation and "safe haven" status.

Friday, June 5, 2020 01:46PM Report Comment
 

17. stillthinking said...

@nickb perhaps over a long period of time you are right, but for a sudden shift down over a short period of time in a specific valuation, housing vs gold 700->200 ounces, but the equivalent valuation against yen for that 2007/8 period only you can see gold even becomes cheaper in e.g. yen. So you could see the same dramatic crash in UK housing in yen as well, but there isn't an online chart of yen vs UK average house prices so I can't link to it, but its implied anyway. The crash was apparent in gold or yen, but it wasn't nominally because of government intervention and its the bet on government intervention which is my point. Rejecting housing as a method of front running the rigged system, for thats what is, when the main purpose of rigging the system is (partly) to maintain housing valuations, how will that work? I can see that stagflation for example the government might be unable to hold valuations up, but thats your savings and deposit going down the tubes for probably a long time.
I think, my humble opinion, is that if you truly believe that -real- house prices are going to fall then you should get out of sterling for that period, because that is a method that would have worked for the 2007/8 crash and we could have all swooped in for a bargain.

Saturday, June 6, 2020 12:42PM Report Comment
 

18. libertas said...

Sentiment is not really the relevant thing. It is the breaking of sale chains that is the problem. Housing sale chains take a while to re-ignite. One sale falling through can have a knock on impact on ten sales. Government was totally insane banning viewings, they had to know that this would cause dislocation of the market. They are psychotic morons who either have no idea what they are doing or, as https://ukcolum.org have been saying, did this to re-purpose government away from serving the people towards micro management. They have, with Coronavirus regulations also flipped us from a Common Law country where you can do anything not prohibited to one where you can only do what is authorised, meaning that just as we leave Europe, we adopt Roman Law / Napoleonic Code.

Sunday, June 21, 2020 08:20PM Report Comment
 

19. nickb said...

> It is the breaking of sale chains that is the problem
The breaking of sale chains is great, as is the huge dent in sentiment. It;s exactly what we need, unless one happens to have bought in Enfield recently.

Monday, June 22, 2020 09:57AM Report Comment
 

20. mombers said...

@19 we sold chain free and are buying chain free just to avoid this mess. A pain to move twice but we managed to sell more quickly and were not vulnerable to gazundering. A small fortune on rent in the interim but - providing the sale works out - will be worth it. The idea of the 'property ladder', i.e. you get ripped off buying a home not suitable for your medium term plans, then rip off your buyer and get ripped off more by your seller, is problematic on so many levels

Tuesday, June 23, 2020 05:49PM Report Comment
 

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