Tuesday, Jun 23, 2020

House sales slump.

BBC News: Coronavirus: House sales plummeted by 50% in May

Interest in buying strong as, as Libertas has pointed out in a previous comment, need for garden and work from Home extra space has increased. On the other hand the medium-sized long term of the economic downturn could make it more difficult to put together a deposit and/or get a mortgage.

Posted by magnifico @ 07:03 PM (813 views)
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1. mombers said...

Look out to be surprised (or not) at how many resources can be thrown at propping up prices and protecting landowners. QE resulted in very little help for labour or capital but gave massive windfalls to asset owners. At least initially the government found some money to help (most) employees and businesses but these programs will wind down. QE, Help to Sell, housing benefit for private landlords, etc, etc will continue at their new, even more generous level for goodness knows when, if ever

Wednesday, June 24, 2020 09:39AM Report Comment

2. nickb said...

Yes, but now there is unemployment and Brexit. People need a modicum of job security, or a large deposit, to buy. Interest in buying is also consistent with holding off while prices fall, whereas if I was interested in selling before COVID, I might be more interested now to get out while prices are still high.

Wednesday, June 24, 2020 09:52AM Report Comment

3. nickb said...

Oh, how interesting (not), the article reports that "Estate agents say demand is now high."
Er, has anyone ever heard an EA say something different? Are there any circumstances in which an EA would say something different, short of Chinese water torture? They only have one song to sing.

Wednesday, June 24, 2020 02:08PM Report Comment

4. mombers said...

@2 yes there is unemployment and Brexit. But if you throw enough money at the problem of plummeting demand, you can always fix it by choking off supply. This can be done by having mortgage forbearance, artificially low interest rates, shrinking council tax in real terms, etc. People in homes that are no longer reflective of their means would have to sell absent these, and housing could be allocated by the market instead. Demand can also be propped up by housing benefit - this has already been increased and low and behold, landlords are now charging the new maximum on new tenancies / renewals, and even trying to get in place tenancies bumped up to the new subsidy. If they were running their service at price £x, why do they suddenly need to raise it to £x*1.1? An indication that they are overcharging in the first place. Which you can't fault them for, I did not charge cost plus a normal profit margin on my BTLs when I was on the dark side

Thursday, June 25, 2020 09:47AM Report Comment

5. nickb said...

What, are they going to helicopter drop meaningful salaries into unemployed workers' bank accounts? I can't see it happening. If you are a lender (sorry mortgage issuer), everyone is now a riskier prospect than before. If you are a borrower, typically you are less certain about your prospects than before. Interest rates (base rate) were already nearly zero, if they are sent into negative territory this is damaging for the banks. Council tax can't shrink because there is too much pressure on council budgets as it is. If they can prop it up, it will take time, as it did last time, and this is much bigger than last time.

Friday, June 26, 2020 06:00PM Report Comment

6. nickb said...

@4 conversely if I were in the midst of buying I might be motivated to believe the government can keep all the plates spinning indefinitely with no hiccups. No offense, I hope it works out for you, but my bets are on the other sqaures.

Friday, June 26, 2020 06:03PM Report Comment

7. mombers said...

@6 the difference between rent and mortgage interest + stamp duty + maintenance and insurance is so huge that over my 5 year fixed rate mortgage prices would have to fall by a good 10% for it to be the right bet. Not at all unlikely that prices will fall by 10% over 5 years but I'd be happy for them to do so. We'd have so much principal paid down that LTV would be the same and we'd get another artificially cheap 5 year deal, and intend to live there until the kids move out. If we sell at that point for 50% less than we bought it for (maybe the government will wake up and stop propping up prices at some point??) then that's awesome as my kids will be able to get on with their lives in cheaper housing rather than living with us in their 30s like so many are now. Fingers crossed for a crash in other words. Very few people benefit from rising prices.

Tuesday, June 30, 2020 11:01AM Report Comment

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