[Closed] House prices post brexit - thoughts?

deadkenny - Member

Another thing is many countries have strict rent control unlike UK.

Scotland is diverging from England on this. No more short insecure tenancies will be allowed in Scotland from now on. Must be for a year and no evictions without good cause.

The problem with a devaluation is that a bunch of people get stuck in their houses unable to move due to negative equity trap, potentially losing their job and then house. Most people wouldn't be directly affected to any significant degree (just through the consequential recession etc).

Until world leaders talk about overpopulation

Don't you mean overconsumption? Because the planet can support dozens of brown people for every white person.

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Usually doing the thing that involves the less people handling your money is the cheapest.

Financial services is well described as “moving other peoples money around untill there is non left”

If you want to talk about catastrophic effects on house prices let's talk about what happens when the baby boomers start to die in large numbers.
There are 5 million baby boomers. 80% of them own their own home. Those homes are the top end of the housing stock typically. There are 25 million homes in the UK, which means that in the next five to ten years, 16% of our housing stock is going to come onto the market for sale.

Worth supplementing this demographic reality of a population with an overweight of old people with this economic reality:

[url= https://www.ftadviser.com/mortgages/2017/11/14/homeownership-dream-fades-for-teenagers/ ]Only 3 in 10 16-18 year olds think they'll be able to afford to buy[/url]

To the extent that real estate is a Ponzi scheme requiring new entrants, that doesn't bode well for continued growth if the new entrants have already decided they won't be bothering...

Other factors to consider
1. [url= http://www.propertyindustryeye.com/foreign-investors-left-nursing-huge-losses-as-they-scrabble-to-get-out-of-off-plan-deals/ ]Foreign investors already bailing out of London[/url]. The Donald's description of Nine Elms as an 'off location' this week wont have helped bring in new investors either
2. Foxtons share price down from 400p in 2014 to 74p last week - never recovered from a big drop after the Referendum which should tell you something about how many foreign buyers are 'pouring into London' and overall transaction numbers
3. Countrywide down from around 680p in 2014 to 109p last week after issuing a profit warning
4. London prices now falling even with government and banks having thrown everything they possibly could to keep prices rising (QE, low interest rates, extended terms, bank of mum and dad, turning a blind eye to foreign money laundering etc) and they're still falling... tells you something about underlying fundamentals of demand/affordability if prices are dropping with such an immense amount of market manipulation...
5. Interest rates beginning to rise, QE beginning to taper off. Up goes the cost of debt. Consumer confidence already on the floor and real incomes falling
6. Tories losing the youth vote - homeowners tend to vote Tory, renters tend to vote Labour - you now have a political motivation for policy to change - Tory base dying off with no young Tories to replace them... The youth appear to be going sharply Socialist in an attempt to force policy change as the Tories refuse point blank to listen to them.
7. Buy To Let dead in the water - likely to increase supply as they sell and reduce demand if no new BTL entrants. As above - Millenials and Gen Z can't afford to replace them - [url= https://www.economist.com/blogs/economist-explains/2018/01/economist-explains-14 ]Why Britains BTL boom is over[/url]
8.A little more economic reality: rising house prices are actually doing very little for the net worth of most households since they occur alongside rising debt burdens which cannot be sustained indefinitely (The Wealth of Humans, Ryan Avent - writer for The Economist)
9. Another economic reality: same writer notes that high housing costs stunt growth, squeeze wages and productivity across the economy and channel the gains from what growth does occur to the rich... Worth noting that since the boom in the UK from 2013 onwards, this is exactly what has happened... Just increases the pressure on the Tories to act if they don't want a recession on their watch (they won't be able to blame Labour this time)

House prices aren't slowing. Crazy prices round my way and they're being bought.

Yep, in the SE they are still increasing at ridiculous rates year on year....

Scotland is diverging from England on this. No more short insecure tenancies will be allowed in Scotland from now on. Must be for a year and no evictions without good cause.

We have also ended right to buy.

One bed flat nearby... £270k!

I rent a brand new two bedroom house with front and back gardens,two bathrooms and balconies for £90.00 a week.Rent is coming down to.It's not in that London as you might have guessed.

Ah my favourite commentator
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Still waiting for the crash i see brooess every so often you do like to mention it's imminancy.

That's 6 years now iirc .

6 years is alot of rent wasted (assuming you don't need the mobility renting affords)

I would like to think Brexit will hit the landlords sitting on big portfolios, many of whom are renting out properties not fit for habitation.

Especially that guy that said "no Indians" etc etc...

It won't though, of course.

Ah my favourite commentator
.

Still waiting for the crash i see brooess every so often you do like to mention it's imminancy.

That's 6 years now iirc .

6 years is alot of rent wasted (assuming you don't need the mobility renting affords)

Nasty response that. Really nasty. People's ability to get on in life, save for a pension, mental health issues, communities being broken up, homelessness increasing, forcing people into massive debt etc etc.

Why would you gloat about other people's misfortune without provocation?

Go on, give us the argument that unaffordable housing is good for the economy, good for people, good for communities, good for families...

Give it 10 minutes, Jamba'll come along and tell you that no matter what happens it'll be the best outcome

Why would you gloat about other people's misfortune without provocation?

As soon as you commented the same response was inevitable.

Many years back you were in the process of buying a flat/house. For whatever reason it did not go through.

Following this you stated how glad you were not to have bought because interest rates were going to rocket and the prices would tumble.

This may still happen but all the years renting with wage stagnation and rising costs mean that on the outside at least it looks like a bad move.

The housing situation in the UK especially the SE is crazy. As many people will say. If you cannot afford to live somewhere and your quality of life is bad move to where you have a better quality of life. there are many factors for quality of life, affordability of living, proximity to family, services etc. One of the massive issues I see with the UK is the fact we are so static and unwilling to move for a better opportunity.

We all seem very grumpy and argumentative at the moment.I think it's either the weather or politics responsible.Other reasons maybe available.

Politics I reckon.

We really can blame the referendum for that!

And the Tories obvs. 😉

One of the massive issues I see with the UK is the fact we are so static and unwilling to move for a better opportunity.

The global economy is rising at a higher than expected rate which may soften the economic blow of Brexit. As such, and assuming house prices keep rising in tune with base inflation at a minimum, ~3% on your salary isn't going to equate to ~3% of your house.

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Small problem there... House prices are ahead of inflation and wages are behind

Could someone do the maths for me please to compare renting vs 'ownership' of a house/ property?

Until you own your home outright, I think you'll find, when or if the shit hits the fan ( remember the late 80's anyone?) the organisation that has loaned you the capital to 'buy' your home will take first dibs on protecting their asset value.

So, calculation to include: Total costs of ownership to include the compound interest payments, other payments to pay off the capital loan, buildings insurance, all maintenance costs also, which will include things like boilers when they inevitably give up the ghost after their built in life cycle, new central heating systems, re-wiring, roof and building repairs and maintenance, window replacements, when the life cycle of the UvPC windows expires, etc etc.

Compared to paying a monthly rent with no illusion of who actually owns the property and no additional costs for making sure the building is maintained.

Alternatively, defend and justify the massive life changing debt that you're chained to, with the additional concern that the value of your liability may not go up as much as was thought, because that's your 'retirement' fund.

Illusion, hook line and sinker. The English economy is based on housing debt, giving nothing but a false impression of how 'rich' we think we are. The only people who benefit from this illusion are the financiers who earn £bn's in interest, oh and the current administration/government. Apart from all of that, ignoring the social responsibilities, obviously private home ownership is a real winner.

Well done everyone.

I suspect the overpriced london / home counties houses may fall / stagnate in value as overseas buyer drop out of the market but otherwise? No.

I suspect the opposite. If you're talking a minimum 5 year period, the SE is the area where prices will rise most, and a lot of that will be due to overseas buyers (that doesn't have to mean overseas occupants, don't forget). For other areas of the UK, it could be a very different story.

slackalice - Member
Could someone do the maths for me please to compare renting vs 'ownership' of a house/ property?

It swings closer to rent if you move more often as taxes and fees add up.

Could someone do the maths for me please to compare renting vs 'ownership' of a house/ property?

I'd have bought mine several times over if I'd had to have rented it over the last 20 years. The rent per annum* is currently 1/3 the price I paid for it!

* based on market rate for the street

I'd have bought mine several times over if I'd had to have rented it over the last 20 years. The rent per annum* is currently 1/3 the price I paid for it!

On a simplistic level, if renting worked out cheaper in the long term, the BTL market wouldn't exist.

What do you mean by FACILITIES?
If there is a demand for something the market will provide.

The market doesn't provide schools, hospitals, parks, playgrounds or greater road capacity, for starters.

scotroutes - Member
On a simplistic level, if renting worked out cheaper in the long term, the BTL market wouldn't exist.

Rent in Bristol is ~1300 for a detached 4 bed, so total throw away money is £15600PA. This will only get worse over time.

A mortgage in Bristol for a detached 4 bed in a decent area and assuming a 10-15% deposit is ~£1100. At that rate, approximately £650 is interest, so your total throw away money is ~£7.8k PA. This will only ever get better over time.

Buildings insurance difference is negligible ~£90PA.

Average boiler - what £2k? over 10 years? £200PA
Central Heating - £6k over 20-30 years? £240PA
Complete re-wire £4-5k over what 25-30years? £150PA
Re-roofing - £8-10k over 30-40 years £257PA
Electrical goods (assuming comparisson against a rent with them provided - £500PA
General servicing - £300PA
General maintenance ~£500PA

So ~£2000-£2500 a year to run the property. Total outlay for owning is ~£10k vs. ~15.5k for renting.

Also on an average house price of £350k and assuming a house price increase of only 2% per year, your gain on the house (at £7k) more than offsets the cost of maintenance and decorating.

Past performance and future predictions again... If you were to buy it now and factor in the cost of that shed?

Given no one can know the future, it isn't unrealistic to use past performance as a guide to the future. Cost of the shed wouldn't make any difference it only cost about 8 months rent.

@slackalice - once I'd paid off the mortgage I put the same monthly amount into a savings account for "capital expenses" should anything need doing to the house. It's surprising how soon it adds up.

Home maintenance tends to be lots of little things done often that are a few quid here and there and a few very episodic things that are expensive. Only had to dip into the CapEx account once for example. I've not added it up but apart from that one item I reckon our annual maintenance/servicing costs are around £200: oil boiler service, having the chimney swept and cleaning out the septic tank every couple of years.

I've always looked at a house as somewhere to live rather than an investment but then we aren't regular house movers (we've been in our current house over 16 years) so all the fees associated with moving have been absorbed, well forgotten about. I've only a vague idea of the current value of the house.

Some interesting historical perspective
https://en.wikipedia.org/wiki/Housing_in_the_United_Kingdom#1900%E2%80%931939
https://visual.ons.gov.uk/uk-perspectives-housing-and-home-ownership-in-the-uk/

Out of interest how does one save the 10-15% deposit when house prices are rising faster than wages and rents are higher? The figures are showing it's taking longer to get there.

@slackalice - once I'd paid off the mortgage I put the same monthly amount into a savings account for "capital expenses" should anything need doing to the house. It's surprising how soon it adds up.

Given no one can know the future, it isn't unrealistic to use past performance as a guide to the future.

@mikenewsmith - I've been lucky with timing TBH. My father died 20 years ago and my brother and I sold some land that was too far away from the rest of the farm just before land prices crashed so I could put a 75% deposit down on a house. Then I moved jobs and bought a small terraced house to use through the week as it was much cheaper than renting - £120/mnth vs £300 . After a few years of that we bought our current house, the terraced house had nearly doubled in price(!) so sold that and paid the mortgage off. A few months later the last recession started.

There are 5 million baby boomers. 80% of them own their own home. Those homes are the top end of the housing stock typically. There are 25 million homes in the UK, which means that in the next five to ten years, 16% of our housing stock is going to come onto the market for sale.

Shall we talk about what happens to house prices then?

well one option is that the kids/grankids who inherit all this wealth will pump it all straight back into housing. Some of this impact is moderated by care costs, but there's a lot of money still left over

Could someone do the maths for me please to compare renting vs 'ownership' of a house/ property?

there's a few good calculators out there (including the efforts above).

https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

The biggest impact of why buying is better vs renting is that rent costs will generally rise with inflation, whereas once you've purchased, the costs are fixed at a given date. Assuming inflation is an average of 3%, over a 25 year mortgage money's value will have halfed - so your mortgage will likely be half of the equivilent of what it is today, yet rent would have gone up in line with money - so even if the 2 have broadly similar costs today, in the long run owning is nearly always cheaper

That does seem like good timing...
But for those starting out now
https://www.ftadviser.com/mortgages/2017/07/13/profile-of-first-time-buyers-in-2017-revealed/
Forgetting the average deposit of 40k and starting at 32 probably means it's a good job the retirement age is being pushed back as it will give people a little more time earning mortgage free.

It was pure luck, chance, whatever you want to call it. There was no market analysis or whatever. I very much doubt if we could afford to put a deposit down on our house now even though my salary has, through moving jobs, doubled in that time.

Unfortunately if the housing market continues as it has done home ownership will be something only a very small amount can afford!!

I don't disagree and I'm amazed every year when prices keep rising at ridiculous rates. However, for anyone in my street buying has been way cheaper than renting, so much so that I suspect most couldn't actually afford to buy their existing house at current prices.

Brooess it's not gloating at people. Like or not you have done the same in the past callin the flip side people crazy for buying houses at the prices they are

It's the incessant insinuation that the crash is coming everytime this is mentioned. EVERY time.

You said right at the start you had the deposit ready you got as far as looking at offering.

We were looking for houses together at the same time.im not gloating at as you say you can't get a deposit . - as far as I'm concerned you might have millions in the bank and being very principals . I'm just pointing out you trot out the same scaremongering stuff every time.

Your need for a roof hasn't changed.

The sooner the nation accepts that a house is a home and not an investment the sooner affordable housing has a chance of happening.

Unfortunately we need a profitable BTL - or people will be living with their parents until thy have deposits and we will lose labour mobility.

So while we have BTL affordable housing has little chance of happening

Unfortunately we need a profitable BTL

I'd disgree. We have profitable BTL at the moment, but the changes to tax law will probably reduce that significantly. Pushing the yeild on BTL ownership down compared to private ownership is a good thing if we want more people owning.

I think the biggest thing about BTL is the tax changes, introduced by the tories of all people, signify that landlords are now an easyish political target (few people shed a tear) - therefore I expect in future there will be more and more pokes at them until the sector shrinks significantly

What we need is a controlled B2L mortgage system which is tied to Rent Control. The mortgage rate continues at the level it was taken out at provided the same tenant is in residence. Should the tenant [b]chose[/b] to leave, the rate will alter to the current level in readiness for a new tenant.

It works in Germany.

Unfortunately we need a profitable BTL

You need rentable accommodation in order to have a flexible workforce. Too much home ownership is a drag on labour mobility, which can negatively affect growth etc.

exactly footflaps We dont have a profitable B2L

we wont have houses to rent.

are you going to invest your cash in something not profitable ?

Go have a quick look at the fee's plus 12 months of rent and see how much you need it to drop to come out even.

Despite concerns about the possible effect of Brexit on house prices I'm going ahead with a purchase anyway as it seems like a better option that pissing away money on rent. I sold my London place in May last year but the place I was buying was taken off the market so I had to rent somewhere at short notice - which will have cost me £25K by the time I've moved into the place I'm in the process of buying. So even if the house prices dip a bit I'm still likely to be better off buying rather than renting.

I think my concern (particularly as I have very little equity in my house) is that an inflation and therefore interest rate increase is quite possible as an effect of any economic disturbance, and Brexit will increase the likelihood of an economic disturbance.

Following on from that, if interest rates rise to something closer to historic norms, a number of people will be put in a position where their properties are not affordable, and prices will crash, and people will be left in negative equity. It will be relatively short term, but most cashflow problems are.

You need a good bit of inflation to erode your mortgage debt. That's how most of the baby boomers made their equity based wealth.