[Closed] Housing bubble.

The first mortgage I had was 10.5% fixed rate & I would need to be able to borrow 7 or 8 times my current salary to buy back the first house I bought at the price it is "worth" now....

Governments depend on rising house prices to keep the chattering classes happy and voting for them.

What we need is a government with the balls to push for occupation of vacant properties and building affordable rental homes on brownfield sites - closer to employment and transport links - to actually deal with the underlying problem.

Any government thinking that relaxing planning laws so more detached executive houses can be built will solve the problem is frankly just....so stupid they should be barred from office!

Well said MCTD. Can we also bar the idiots that voted for them? Maybe banned from voting in the next election while they think about what they've done.

But you can't advocate building high density or high rise buildings in London without a whole bunch of racist rubbish about "Dubai-on-Thames" being spouted

Part of the problem is no one seems to be building 2-3 bed family homes. It's either 4/5/6 bed 'luxury' properties, or 1/2 bed flats (i.e. suited to people with lots of money, or suited to BTL landlords).

Market feels very very peaky at the moment and with prices increasing so rapidly this year it's the absolute classic sign of the frenzy that precedes any market bust. Prospective BTL purchasers are trying to complete their transactions before the start of April when the new BTL tax system takes effect - I suspect after April demand will drop significantly.

Don't forget when prices start to drop then they can drop fast. With the amount of leveraged BTL cash and investment property sloshing around then the market is much more susceptible to this than ever before. Once prospective property purchasers get wind of this then they're liable to sit tight and postpone their purchase, adding fuel to the fire, after all why buy a house now when in 6 months time it could be £££k cheaper?

whilst the 3% tax increase will certainly cause a slight bump-then-depression in interest (perhaps bringing forwards interested btl purchasers by up to 3 months), I don't think the additional tax will cause much impact to the market overall. House prices tend to rise by approx 5% per year on average - so the additional tax is wiped out in just 7 months of price growth - plus it can be offset against capital gains tax, so the real cost is lower.

The removal of the ability to offset some interest will make more of a difference, but I suspect it will be mostly offset by pensioners (who, generally not being in the 40% tax bracket, won't be affected by the change) cashing in their pots and buying a couple of properties with the result.

house prices are certainly rising quickly, but the only way to tell if its a long-term-trend or a bubble is to see if it bursts. down here in the south east, we've not had a significant 'bursting' in over 20 years. Its important to remember that markets can remain irrational longer than you can remain solvent.

and no matter how wrong it is prices keep going up.

Not everywhere and not always.

Plus, going back to the illusion of it all - the 'gain' existing homeowners get is not real unless they sell their home and move to a cheaper area or downsize, whilst also having to spend a chunk of that 'gain' on transaction costs - stamp duty, estate agents' fees at the like.

Meanwhile, a chunk of your taxes goes on Help To Buy and Housing Benefit... so you're paying for a chunk of your illusory gains with real taxes...

The only real wealth created from super high house prices is in the banks who get to charge us even more in interest rates as the nominal amount we borrow goes stratospheric.

As Agent007 says, the current situation, where 'values' are totally detached from the fundamentals e.g. wages - and is showing all the signs of a traditional bubble... e.g. Dutch Tulips, Wall Street 1929, UK housing late 80's, US subprime 2007+... we appear to have BTLers bidding up prices by more than 3% in order to save themselves 3% in stamp duty - that's not a sign of sensible investment strategy - it's total stupidity - which usually precedes a crash. look at stockmarkets right now for e.g.

BTLers are going to find themselves in a storm of their own making as they massively increase supply of rental property available, buy at the top of the market expecting to be able to rinse tenants for the extra cost and then find the increased supply means tenants have the upper hand in price negotiations... then Osbourne's tax changes kick in next year and the BLTers find themselves losing money every month...

It is insane how much the houses cost in the South-East.

Coincidentally I live in Cobham with my family, just next to Leatherhead - we've been here 25 years, before it became the place for footballers to live.

I'm now obviously not a kid anymore, I'm with a long term girlfriend. We have a combined income of £75k a year and I can't even DREAM of buying a house around here - you're looking at a minimum of £300k for a 2 bed - and a shit one at that.

We're buggered.

"then Osbourne's tax changes kick in next year and the BLTers find themselves losing money every month..."

you keep siting this .... how ever as the tax will go up across the board - youll find rents go up across the board - even those not affected by it will use it as an excuse to put their rents up to match the others so they get more money in...... cutthroat business.

and then find the increased supply means tenants have the upper hand in price negotiations...

Absolutely tons of new build 2/3 bed houses round here, and plenty of flats too, admittedly not so many one bedders. I wouldn't say they were for people with loads of money either as older properties are a good deal cheaper round here.

you keep siting this .... how ever as the tax will go up across the board - youll find rents go up across the board - even those not affected by it will use it as an excuse to put their rents up to match the others so they get more money in...... cutthroat business

or alternately, put the property in someone not in the high-rate-tax-bracket's name (ie the wife\child), or push the proceeds into a pension, or (if they're loaded enough) form a limited company with > 15 properties which bypasses the tax entirely.

Rightly or wrongly, the tax really only affects smallish-time investors, who are highly leveraged, who do pay high-rate tax, who don't have a low-income relative to get the benefit. It will impact the rental market, but not by a huge amount

find the increased supply means tenants have the upper hand in price negotiations

http://singletrackworld.com/forum/topic/negotiating-when-one-party-goes-back-on-the-agreement

i guess this hasn't happened yet then ?

The impact/distortion of the market created by [s]stealing[/s] the current unorthodox monetary policy is clearly illustrated in the Halifax data (see my earlier link)

In certain parts of the UK and for the UK on average, the house price to earnings ratio is at the highest level since the early 80s - although this heavily skewed by SW, SE, E Mids and London. Interestingly NI remains below the long term average.

But on one measure of affordability - mortgage repayments as a % of income all regions bar London remain below the LT average.

Quite scary stats really.

Around Surrey (Leatherhead, Cobham etc) there is essentially nothing being built.

You either get tiny 1 or 2 beds to flog to desperate buyers or you are getting massive 4/5/6 bed properties that are going for 650k++.

There is no hope of buying a property round here for anyone I know. Unless you have parents with ££££ or get incredibly lucky with your earning potential, you're out of this area for certain.

So, the big question, should we empty the savings and pester the bank for a further advance in order to buy a BTL house before the stamp duty changes? I've been looking for a while and pondering, but our plan was to wait another 18 months until the previous one is fully paid off. Are we better off swerving the stamp duty or biding our time?

So, I've RATS (mostly) and it seems that

1: There's a bubble.
2: It's not "real" money...
3: Calculators only offer a "rough" estimate.
4: Prices are rising insanely fast but there are loads of willing buyers.

Suits me. Line up the ducks and I'm off to sunnier climes. Happy days.

I think one problem is places getting PP to build extensions combined with stamp duty.

Stamp duty makes it unnattractive to move because of the financial penalty, so people that could downsize now the kids have moved out are unlikely to, and people who want more space find it cheaper to get PP and extend, so removing the stock of that sized house from the market.

and no matter how wrong it is prices keep going up.

Not everywhere and not always.

There are three houses down my road that have been on the market since September/October.
They have all recently had £100k+ lopped off the asking price.

£1m pound houses in Surrey don't appear to be selling...

They have all recently had £100k+ lopped off the asking price.

According to Rightmove there are 486 properties round here under £100k, and I don't think that includes new builds.

They have all recently had £100k+ lopped off the asking price.

£1m pound houses in Surrey don't appear to be selling...

There is no hope of buying a property round here for anyone I know. Unless you have parents with ££££ or get incredibly lucky with your earning potential, you're out of this area for certain.

As others have said, it's a London-centric and South East problem, we lived on the Hampshire/Surrey border and sold last year....there were 40+ viewings on our open house day...and the property sold that day....for above asking price, bonkers.

I bought in 2004 before things went truly nuts, I wouldn't be able to now....in fact if we'd stayed in the South it would've been a sideways move....very depressing.

So....we moved to Wales.

Lovely village location, detached cottage, 4-acres of land with stables, a river bordering one side of the property with fishing rights and some of the best MTBing in the UK on the doorstep....i'm almost embarrassed to say how much it was....250k.

Obviously I've dropped a few thousand in salary but bizarrely Mrs Deviant earns more now, seems there's good money in care and Wales has a huge elderly population.
Sorry to brag but life is idyllic, I don't spend nearly as much time online any more, I ride more, I walk the dogs more, I'm learning to ride the other half's horse etc...the pace of life is slower, people are more relaxed than down South...i don't miss it, can't ever see myself coming back....days on Cader Idris or the Brecon Beacons are priceless, I feel semi retired and I'm not 40 yet.

Try it, come on in the waters lovely!

i guess this hasn't happened yet then ?

Well, the flat I didn't rent on the basis the LL wouldn't negotiate was still on Rightmove last time I looked last week, with the rent dropped from 900 to 875 - now empty since early November... so that's roughly 3 months at £900 lost revenue... I would have been in and paying rent from before Xmas if they'd been more reasonable...

Anecdote is not data but I think the LL miscalculated on this one, and I suspect not the only one who has... there's quite a few flats coming on the market where I am with tenants in situ, being sold as 'investments'. Who would do that if BTL was such great 'investment?'

My parents were looking at investing pension money into property and they have been watching the housing market where they live in surrey and say the 1m + houses have stuck completely at the moment - their theory is the new stamps duty for that price band.

Stamp duty maybe has a little to do with it. The extra duty payable is negotiating ammo on the price, but uncertainty about Brexit is more likely. Many folk around here work in the city and there is the distinct possibility that their jobs will be transferred abroad.
Even without Brexit some City firms are rumoured to be moving to Birmingham.

There's quite a few developers that have been sitting on unsold 4/5/6 bed properties for 6 months or so.

they bought a small very run down bungalow in the end for 500K and are renovating,

And i got flamed for suggesting that looking at spending half a million and then renovating was "unreasonable". That was mostly 3 or 4 bed places as well.

I was brought up in nice part of Cobham, towards where the Chelsea training ground is now, and now live in Bookham which feels like a suburb of Leatherhead. My guess of what my house is worth does fit in with that calculator - which is about 10% less than what Zoopla/Mouseprice say. I have noticed houses around the million mark struggling to sell locally but also friends looking for places half that price were seeing prices rise quite quickly earlier last year so maybe there's some sort of price issue there - a lot more people chasing the cheaper places?

Now working on a long-term project near Cheltenham and would love to move here as like the Cotswolds and there are some lovely places to buy here, but stamp duty stops me. It would be OK if I knew it was a permanent move but that is unlikely really so I have to carry on with my weekly commute.

Lovely village location, detached cottage, 4-acres of land with stables, a river bordering one side of the property with fishing rights and some of the best MTBing in the UK on the doorstep....i'm almost embarrassed to say how much it was....250k.

Many of us in the SE could retire by moving to somewhere like that. Not sure what's stopping me!

When my parents first bought their house in Cobham in 1991 they paid £80k for it - it had a valuation last year at £585k. The house next door which was quite a bit smaller sold for £650k so I think the house is probably worth more.

To give an idea as to how unrealistic these prices are - the people living on my parents road have been in their houses for a minimum of 15 years. I would imagine 98% of the people on the road wouldn't qualify for a mortgage to re-buy their homes if they had to now.

Two houses have sold on our road in the past 5 years - one to a hotshot owner of a tech start up (has two Range Rovers..) and the other by a couple who inherited millions off the parents. Go figure.

It actually scares the bloody life out of me when I consider that at some point in time I'm going to have to buy a house - every person I know lives around here, I work in Fetcham, my entire life is here and I'm absolutely going to have to throw all of that away and uproot entirely if I want to own my own home.

Deviant - but that is what should be happening, Shirley.

Interestingly, I am advising both my sons and other students on what to do and for the first time I am [b]strongly[/b] recommending regional opportunities in a variety of professional services. Partly push and partly pull factors involved. However, I think this needs/will be the generation that breaks the natural pull of the SE and London. That would be a very good thing IMO.

Living in this corner of the Southeast (Cobham/Leatherhead/Bookham) and working in London its like a different country at times. There are people here paid salaries quite out of kilter with the rest of the UK and now huge amounts of family wealth due to the increase in the value of the housing stock (a friend on average wages bought an almost £1M house nearby in 2014 using an inheritance - which has the downside of the loss of loved ones). Coupled with no building, long term low interest rates and increasing demand for housing, I can see a slow down but not a crash.

Many of us in the SE could retire by moving to somewhere like that. Not sure what's stopping me!

Same here - had an agent round to value house the other day.

We could easily change our lifestyle and be mortgage free in the sticks, but I worry it's just a "grass is greener move" that we wouldn't be able to unwind if we didn't like it.

The general sentiment amongst myself and my friends (professionals - I work in software development and all of my mates are suits that work in around London) is that there HAS to be a crash at some point.

The problem I reckon lies with the fact that our generation cares much less about property - I wouldn't pay £500k for a 3 bed house around here even if I had the money. It's just extremely poor value.

I could move up to the Midlands and my commute time to central London would be the same amount of time but I'd be paying half the amount for my house.

I reckon as the generation I'm from become the primary earners of the area you'll see less and less people caring about being here.

Lovely village location, detached cottage, 4-acres of land with stables, a river bordering one side of the property with fishing rights and some of the best MTBing in the UK on the doorstep....i'm almost embarrassed to say how much it was....250k.
Many of us in the SE could retire by moving to somewhere like that. Not sure what's stopping me!

The only thing that's stopping me is my daughter finishing her education.
Once A levels are out of the way, we're off!

People who don't own houses keep saying that the prices will crash as if they say it enough, they will.
They will go down a bit, and they will go up a bit. There is very very little chance that this magic crash that renters are hoping for will ever happen. There is too much money at stake.

when you have a hospital consultant on 80K unable to afford a family home where the hell are all the nurses, doctors, teacher, firemen, etc going to live ?

Many of us in the SE could retire by moving to somewhere like that. Not sure what's stopping me!

Pretty much my retirement plan, we almost looked at a farm in North Yorkshire on the hill overlooking Guisborough (i.e. the back of Wilton Bank,whatever it's called). Big farmhouse, stables, yard, barn + 19 acres, £250k. House prices in the SE only have to average the same increase as the NE for me to retire just by selling the house at the end of the mortgage, let alone my pension!

when you have a hospital consultant on 80K unable to afford a family home where the hell are all the nurses, doctors, teacher, firemen, etc going to live ?

The inflation that London and the South-East has experienced is ridiculous though - if you move 15 miles in any direction east west or south from where I live you'll see probably a 20% reduction in house prices.

It's not sustainable and it can't keep increasing - as the prices keep increasing less and less people will be willing (or even able) to buy here and there is only one thing that can happen from that point - a crash.

Wages aren't even nearly keeping up with the price inflation and I would hedge a bet that the majority of people that live in these areas are holding onto their homes by the skin of their teeth. Certainly everyone that I know.

There are still <£200k houses, they're just not in nice desirable leafy suburbs.

Where? I'll buy it right now.

Bought a house in Aberystwyth in 2012. It's now on the market, reduced to 10k less than I bought it.

Would've been better off spending the deposit on hookers and coke.

Not really feeling much of a housing bubble here.. 😐

thisisnotaspoon - Member

we almost looked at a farm in North Yorkshire on the hill overlooking Guisborough (i.e. the back of Wilton Bank,whatever it's called). Big farmhouse, stables, yard, barn + 19 acres, £250k.

are you sure there isn't a '0' missing from that price?

[quote="enbern]It's not sustainable and it can't keep increasing
Easy to say that but it doesn't make it true, or even mean it'll happen any time soon. I have a clear memory of sitting in a pub in Ealing with a mate having that same conversation ~20 years ago. Still waiting.

I see there's lots of hate for the BTL crowd 🙂

The current demand due to the increase in SDLT is only a blip and prices won't plummet in April. There will be plenty of non-BTL buyers staying out of the market right now waiting for that drop.

FWIW, my brother is selling his 2-bed flat in London atm. Needs work, 10 viewings lined up on the first weekend it's on the market. Asking £720k...

Edit - literally just heard they have accepted £715k.

I live in Surrey and tried taking out insurance against a crash with www.protectyourbubble.com, but no go 🙁

people keep talking about a crash but it didn’t happen properly the last time with only a small correction followed by a buying frenzy.
I was a believer and posted the rollercoaster house price crash jpeg on several threads on here over the years showing the boom/bust cycle but it never really happened in the way renters with savings hoped.
my thoughts are that in london/SE sensible property (by that i mean £200-£600k) will always be relatively buoyant simply due to demand and people will look to other areas for value, something i did when i bought last year in SE19, in 18months since then the artisan cafe to chicken shop ratio is now very much in favour of the single estate aeropress with vegan cup-cake for £6 and foxtons have opened a branch to ramp things up a bit. they have a flat in my small block on the market for 70k more than i paid for mine and it’s likely to go for just below asking fairly quickly, thing is it’s ‘affordable' for double income couples or singles with a decent but not nutty wage. the £1.5million plus market is almost it’s own microcosm in London and that’s where things look a bit flat after the recent changes but thats for the city boys and foreigners with money to park somewhere safer than their own country.
as an aside to this there has been a shift in the demographic in some of the flats here with manual or low skilled workers being priced out of renting in the block as i overheard a conversation between 2 tenants talking about the rent going up from £600-£800 and having to move, thing is that’s still cheap! should be more like £1k-£1.2k a month. now young professional couples have moved in as they can afford it and want somewhere with a park/transport/artisan pizza and a farmers market. this gentrification still has a lot of ground to cover in london before it’s one huge Stoke Newington with an Oliver Bonas and mini-waitrose on every corner.

I agree it's very easy to say that and with the way the current government is going it's definitely not going to happen immediately.

The simple answer is to just build more bloody houses. There is a development that could be happening around the area soon at the old Wisley Airfield.

2500 new houses, essentially a whole new village. You can understand why there is so much opposition from current homeowners in the area..

I say get ****ed to the lot of them, build the houses so I might actually have a chance!

Easy to say that but it doesn't make it true, or even mean it'll happen any time soon. I have a clear memory of sitting in a pub in Ealing with a mate having that same conversation ~20 years ago. Still waiting.

this. there is never a good time to buy a house. best to just suck it up, and get on with it.

I could be nearly mortgage free by now if I'd bought when I first had a stable enough income too rather than umming and erring and waiting.