Viewing / Buying a house

[Rugeley Villa]

4 minutes ago, Kingman said:

Newmarket starts on Thursday, Stick the £20k on Caravaggio and buy your house on Monday morning! . 

You would be a fool to bet against him. I foolishly bet against him at Royal Ascot with Harry's Angel. Harry's Angel had done me good business in the past. 

[Kingman]

4 minutes ago, Rugeley Villa said:

You would be a fool to bet against him. I foolishly bet against him at Royal Ascot with Harry's Angel. Harry's Angel had done me good business in the past. 

I'm trying to build up on our deposit so will be balls deep anything around Evs. 

[Kingman]

Spoke to soon!.. 

UK House Prices ‘On Brink’ Of Massive 40% Collapse

Housing-Market / UK HousingJul 04, 2017 - 05:23 PM GMT

By: GoldCore

– UK house prices on brink of massive 40% collapse
– UK  at ‘edge of worst house price collapse since 1990s’
– Two leading economists warn of property crash
– “We are due a significant correction in house prices”
– Brexit and wages failing to keep up with inflation to trigger collapse

 

 

– Trend starting in London before fanning out to rest of UK
– UK homeowners unconcerned – 58% expect prices to rise
– Over 1 million mortgages under threat in UK
– Concerns of return of new “negative equity” generation
– Huge denial amid recency bias and endowment bias – emotional attachment to expensive things we buy – especially our homes
– Good news for first time buyers – bad news for UK banks and indebted, vulnerable UK consumers and economy

Editor: Mark O’Byrne

Two leading economics professors have warned that the UK housing market is on the brink of a 40% collapse, echoing the early 1990s property crisis.

“We are due a significant correction in house prices. I think we are beginning to see signs that correction may be starting” Paul Cheshire, a professor of economic geography at the London School of Economics told the Mail on Sunday.

The sharp correction or crash may come about due to two primary factors – Brexit and a fall in real wages as they fail to keep pace with rising inflation.

Despite these warnings following swiftly on the tail of recent poor housing market data, homeowners seem unfazed by what the future might hold, disregarding the parallels that are being drawn between today and the run up to the 1990s property crash.

Brexit deals another blow

Professor Christian Hilber and former Government housing adviser, and Professor Paul Cheshire warned that Brexit could be a catalyst for the correction which will see thousands of homeowners plunged into negative equity.

Hilber warned that the crash will not be short and sharp:

“If Brexit leads to a recession and/or sluggish growth for extended periods, then an extended and severe downturn is more likely than a short-lived and mild one.”

Brexit continues to create massive uncertainty. Last week we reported on the Bank of England’s Financial Stability Report which pointed towards an ‘adverse shock’, such as Brexit and how it might ‘may amplify a negative feedback loop.’

Wages fall short of inflation

The Professors also explained how wage growth’s failure to keep pace with inflation could result in a fall in house prices.

Last month official measures of inflation showed it was at 2.9% (although we know real inflation rates to be much higher) whilst incomes climbed by just 2.1%.

The OECD painted a bleak picture of the UK economy back in June when it showed that ‘inflation at 2.7% during 2018 would dwarf wage growth of 1.5% and result in the UK have the weakest real income performance, alongside Finland, of any of its 34 rich member states.’

The situation for the UK economy is not expected to improve as growth slows from 1.8% in 2016 to 1.6% this year and just 1% in 2018, according to OECD figures.

Follow the (London) leader

“Historically, trends seem always to start in London and then move out across the rest of the country. In the capital, you are already seeing house prices rising less rapidly than in other parts of Britain,” Cheshire told the Mail on Sunday.

This falls in line with our coverage last week of the weakening of prices in the London housing market. In the same week the Council of Mortgage Lenders said the housing market had ‘stalled’ and that in May over 75% of houses in London sold for less than the asking price.

In contrast an ‘ex-Bank of England guru’ predicted last week that we should not worry about the recent weakening in the housing market. David Miles, professor at Imperial College London, somewhat complacently told the Telegraph:

“The conclusion that I draw is that it is not implausible that house prices, which have become very expensive relative to people’s incomes, instead of over the next 30 or 40 years reversing that to go back to where we were in the 1970s and 80s, either stay as expensive as they are right now relative to incomes, or conceivably, unfortunately, rise further.”

With mixed predictions from experts and mortgage rates still very low, is it any wonder that we are seeing little reaction from homeowners themselves?

A petri dish of market emotion

Despite evidence showing that house prices are coming down, inflation is climbing and incomes are falling a Halifax survey shows that 58% of people agree with Prof. Miles and expect the average property price to rise in the next 12 months whilst just 14% expect house prices to fall.

According to the Council of Mortgage lenders there are 11.1 million mortgages in the UK, with loans worth over £1.3 trillion. With that many stakeholders in the property market is it unsurprising that they fail to believe times are taking a turn for the worst?

The confidence of house market participants seems to come from a place that is unaffected by major issues such as affordability and political instability. Instead it is a market psychologist’s petri dish of examples of emotional biases.

Instead of looking at inflation rates, incomes or Brexit worries homeowners are boosted by the likes of recency bias and herd behaviour – they forget the damage of the crash in the 1990s or the booms and busts exist at all instead remembering the most recent good times of climbing house prices (recency bias).

We saw this in the 1990s when the housing market crash of the early-1990s followed a housing boom in the late 1980s. At the time very few of the so called experts predicted the crash and most denied it would happen – even as it began to happen.

This recency bias is spurred on by the local herd (estate agents, parents at the school gate) telling them that house prices should be this high and that the area is desirable (confirmation bias).

All of this feeds into endowment bias – we place a higher value on an item that we own ourselves and we get emotionally attached and vested in things we personally own.

Our homes are more often than not the most expensive things we will ever own, to imagine it will be worth less than we paid for it, is rarely something we can bring ourselves to consider.

Confidence boosts equity release schemes

Endowment bias feeds into the minds of those who are looking to release equity from their homes.

The number of people who have chosen to release equity from their homes has climbed 72% so far in 2017, compared to the same period last year. According to Responsible Equity Release research this is to ‘cover pension shortfalls, prop up savings accounts hit by low interest rates and pay off mortgages.’

It is in the South West of England where homeowners are really taking advantage of the high house prices. More than four times (357%) more equity has been taken out of 2017 to date, in the South West, compared to last year.

All of these people who are either stepping up the ladder to a bigger house and therefore bigger mortgage or are releasing equity from their homes are clearly choosing to ignore the many warning signs.

Conclusion

Whilst Brexit and inflation threats appear to be the stuff of media hype the past and the history of property bubbles should not be ignored.

The LSE professors have drawn parallels with today’s potential crash and that we saw in the early 1990s. That very crash saw house prices fall nearly 40% over six years and sent over one million people into negative equity.

Often economic downturns hit households hard because of their uncanny ability to believe these things won’t happen to them. We no longer live in a society where people prepare for the worst.

We have been encouraged to believe the boom times are here to stay and the bad times are just a minor blip, which may or may not happen.

Unfortunately that results in poor and damaging financial decisions, such as leveraging you and your family to the eyeballs when it comes to buying a house or releasing equity in your family home.

Homeowners would be sensible to open their eyes to this currently uncertain and unsustainable situation and take the necessary precautions. These include paying off mortgage debt and reducing exposure to property and risk assets in the UK.

Prudent diversification and not having most of or all your eggs in the certain baskets remains the key, as does having an allocation to physical gold to hedge the growing risk of a property crash.

http://www.marketoracle.co.uk/Article59579.html 

[TrentVilla]

 

There is not going to be a 40% reduction in house prices, its absolute poppycock, really it is. 

[Kingman]

House prices are 50% overpriced . They are killing the economy and ruining young peoples lives.

The crash is coming and it's going to be big.

[Rugeley Villa]

25 minutes ago, Kingman said:

House prices are 50% overpriced . They are killing the economy and ruining young peoples lives.

The crash is coming and it's going to be big.

So basically what you're saying is that they will come down to what they should be. 

[Kingman]

1 hour ago, Rugeley Villa said:

So basically what you're saying is that they will come down to what they should be. 

I think the arsehole is about to fall out the price mate, Not a matter of if but when! 

There was an article in last nights express and star also with the same reservations. 

[Rugeley Villa]

11 minutes ago, Kingman said:

I think the arsehole is about to fall out the price mate, Not a matter of if but when! 

There was an article in last nights express and star also with the same reservations. 

Good for buyers, but no so much for sellers. The only problem is they will sky rocket again. Everyone that works should be able to afford to buy an house within reason.

[Kingman]

1 hour ago, Rugeley Villa said:

Good for buyers, but no so much for sellers. The only problem is they will sky rocket again. Everyone that works should be able to afford to buy an house within reason.

Yeah, Ive been looking for a while now but have decided to to sit on the sides for the next 12 months and see what happens. 

I would be surprised if they fell 40% however there will be a significant correction, whether it will be to that extent only time will tell. 

Ive been on sites like right move and zoopla almost daily for the last 12 months so have seen whats been slowly developing, 

Ive a property in my saved searches with an asking price of £230k around xmas, over the weekend its now £175k and a pattern is slowly emerging with many others. 

I read an article recently from The National Association of Estate Agents stating that only 23 per cent of the homes sold in May fetched their initial asking price. 

 

Edited July 11, 2017 by Kingman

[Rugeley Villa]

12 minutes ago, Kingman said:

Yeah, Ive been looking for a while now but have decided to to sit on the sides for the next 12 months and see what happens. 

I would be surprised if they fell 40% however there will be a significant correction, whether it will be to that extent only time will tell. 

Ive been on sites like right move and zoopla almost daily for the last 12 months so have seen whats been slowly developing, 

Ive a property in my saved searches with an asking price of £230k around xmas, over the weekend its now £175k and a pattern is slowly emerging with many others. 

I read an article recently from The National Association of Estate Agents stating that only 23 per cent of the homes sold in May fetched their initial asking price.

I've not taken too much notice, but going by what you've said something is definitely happening. I'm all up for properties coming down to what they realistically should be. 

[markavfc40]

1 hour ago, Kingman said:

House prices are 50% overpriced . They are killing the economy and ruining young peoples lives.

The crash is coming and it's going to be big.

There is no way they will come down by 40% but I do agree that that there will be a drop and it is needed.

Houses are significantly overpriced and since I purchased my first house in 1998, despite one down turn around 7 years ago, overall prices have sky rocketed. I paid 35k for my first house. That same house is now worth 5 times that. Over that same 19 year period average earnings haven’t gone up 500%. In fact they haven’t even got close to doubling.

House prices at this level isn’t sustainable and I really feel for those people trying to get on the housing ladder. For any kind of house in anything like a half decent area you must be looking at 140k. Even with a 20k deposit that is a 120k mortgage.

There is definitely a shit storm round the corner. Some people are mortgaged up to the neck and whilst interest rates are so low that is fine but if/when they rise even by 1 or 2% many people are going to be in serious trouble.Of course what would also help prices fall is if the government build more social housing and encourage more house building overall.

I got to be honest I have zero issue with my house price falling dramatically if it means those generations trying to get on the ladder now, or who will be trying to get on it in a few years, as my children will be, have the same viable/affordable opportunity to buy their own home as I did.

[AlwaysAVFC]

1 hour ago, Kingman said:

House prices are 50% overpriced . They are killing the economy and ruining young peoples lives.

The crash is coming and it's going to be big.

No sign of a slow down by me at the moment. Just walked past an average 3 bed bungalow with a sold sign on that went on the market not long ago for £460k, so presumably they got that more less.

If there is to be a massive crash, I imagine it's going to be down to more than just the housing market. As someone that's looking to buy there first home. I have mixed feelings about wishing for this as there could be other consequences.

Whatever happens I'll be moving from this Village, I'd love to stay but prices are just way too much for me, unless we are able to buy our housing association home in the future. 

 

Edited July 11, 2017 by AlwaysAVFC

[Kingman]

1 hour ago, markavfc40 said:

There is no way they will come down by 40% but I do agree that that there will be a drop and it is needed.

Houses are significantly overpriced and since I purchased my first house in 1998, despite one down turn around 7 years ago, overall prices have sky rocketed. I paid 35k for my first house. That same house is now worth 5 times that. Over that same 19 year period average earnings haven’t gone up 500%. In fact they haven’t even got close to doubling.

House prices at this level isn’t sustainable and I really feel for those people trying to get on the housing ladder. For any kind of house in anything like a half decent area you must be looking at 140k. Even with a 20k deposit that is a 120k mortgage.

There is definitely a shit storm round the corner. Some people are mortgaged up to the neck and whilst interest rates are so low that is fine but if/when they rise even by 1 or 2% many people are going to be in serious trouble.Of course what would also help prices fall is if the government build more social housing and encourage more house building overall.

I got to be honest I have zero issue with my house price falling dramatically if it means those generations trying to get on the ladder now, or who will be trying to get on it in a few years, as my children will be, have the same viable/affordable opportunity to buy their own home as I did.

Yeah Its a national disaster what has happened to house prices, though its about to reverse in a massive way.

The crash thats just starting will be huge but doubtful as the predicted 40%

For me the no 1 priority for any government after defence should be keeping the housing market at a point where ANYBODY who goes to work for a living can afford a decent home at a price they can pay off quicker if they choose.

Every policy for the last 20 years has been against working people, Every one they have pushed houses up because immigrants matter more than our own young people. The boomers retiring with massive amounts of income/assets matter more than a 25 year old flogging on. Foreign aid matters more than lower income tax here, People on welfare matter more, Everything they have done is to funnel money through houses and benefits to the already rich.

Now im right leaning myself, but this is a disaster in the longer term.

They wont ever change but they dont need to, The market is about to do it for them and Young people are about to matter again as a huge crash wipes asset prices.

They just need to wait a little longer and the reflation cycle after the crash will favour the young. Wages will keep up mostly with the inflation but asset prices wont.

Those BTL empires built on leverage will be Toast, Most of them will go under the hammer probably taking the family home with them.

Edited July 11, 2017 by Kingman

[ender4]

Houses around Solihull still consistently selling in under a week for above asking price, especially the lower end of the market. 

Only above £750k does the market seem to be slowing. 

[omariqy]

You only need to apply basic economics of supply and demand to know that prices won't fall 40% across the board. There are more willing and able buyers then there are houses. Until that changes you won't see a rapid shift in prices. Maybe a stabilisation. 

[Kingman]

What I find particularly encouraging at the moment is the lack of additional props in the pipeline. Even if something was announced today, it would take maybe six months to provide support to prices. So, the rest of 2017 certainly looks like falls. Then, looking forward, there are current props coming to an end in the coming months (FLS) and more tax blows to BTL. Throw in an IR rise and things get very interesting.

Wonder what will happen to the Term Funding Scheme next month? it's critical If Carney can get the TFS extended then HPC celebrations might be premature.

On the other hand he's got to be careful. With inflation as high as it is now relative to incomes, and the UK economy as dependent as ever on imports, he dare not risk another run on the pound.

Edited July 11, 2017 by Kingman

[choffer]

4 hours ago, Kingman said:

House prices are 50% overpriced . They are killing the economy and ruining young peoples lives.

The crash is coming and it's going to be big.

So all I need to do is find someone to buy my house now and then agree to sell it back to me after the crash, then I'm quids in.

[Kingman]

8 minutes ago, choffer said:

So all I need to do is find someone to buy my house now and then agree to sell it back to me after the crash, then I'm quids in.

2018 will be 2008 all over again. 

[rodders0223]

I am looking to purchase a house as soon as possible and have been looking at a few the past week.

If this 40% drop could happen some time this week then that would be smashing.

[Rugeley Villa]

9 minutes ago, Kingman said:

2018 will be 2008 all over again. 

You heard it here first lads, straight from the horses mouth.