It’s now becoming less easy to borrow money, despite rock bottom interest rates, and that will continue.
After a flurry of announcements by Rishi Sunak he’s now resorted to stating the obvious – in summary, this is going to get much worse.
Banks have increased provisions for bad debts.
Job losses will increase over the next few months – and, possibly, for much longer.
Estate agents continue trying to boost the market through over-optimistic asking prices but property consultants – Jones Lang LaSalle and others – are forecasting average reduction, excluding London, of c7.5% by year end; that’s after factoring in the temporary stamp duty adjustment.
As for ‘…REALLY plummet’, I can easily see 10% reduction; as for anything more than that, certainly possible and it wouldn’t surprise me.

A big drop in house prices would be really bad for the economy – distress sales, banks having to write-off billions in bad debts. It’s going to be bad enough by the time the adjustment in commercial property values flows through to things like pensions (mine’s dropped 15% this year). There does need to be a big growth in social housing – money’s cheap – as it will drive down private rents and make it less attractive to short-term investors. Release of this stock could help moderate house prices. In some places, there’s already a massive over supply of flats to rent – speculative developments sitting empty.

banks having to write-off billions in bad debts.

Anyone would have thought they might have learned from 2008 that lending more isn’t always good for them or the customer.

“I had nothing and saved up all my sand and I bought a **** hole in a **** hole and had nothing and did all the work etc, bollocks, etc….

I do rather think that a lot of this “entitled youth of today / bloody millennials*” narrative is simply jealousy. People of previous generations had nowt because there was nowt to be had.

(* – some of whom are now grandparents)

wives work a lot more, probably increasing the spend by 50%

Back in my grandparents day you had the ‘family unit,’ the bloke was the breadwinner and the wife stayed at home looking after a house and squeezing out children in the hope that they lived past childhood. That single head-of-the-household’s income had to provide for the entire family.

Come the revolution, women more commonly entered the workplace, we had the explosion of DINKYs in the 80s. This is great, we can double the household income (assuming equal pay, which we’re still working on today)! Cost of living vs absolute wages shot up and because dual salaries was commonplace no-one noticed.

Fast-forward to today, both partners now have to work in order to keep afloat. I can’t help wonder whether we’d be in the same position today if women in a family had gone to work instead of the men rather than as well as.

Agreed. Almost all these threads are shot through with some kind of blame for older people and the suggestion that it was easy in those days.

I almost feel guilty about bringing it up, but one day all you lot will be old too, listening to the latest generation of know-it-all ingrates slag you off…

Less people or more land. Those are literally the only ways house prices can fall in real terms.

I’ve been thinking about how you’d get house prices to £30,000.

You forgot option e) Move to Cumbernauld.

If any government wanted to keep prices down they could simply tax capital gains on primary residences as well as secondary. Say 50% tax on all profits over 2% per annum? Would keep prices nice and flat

Fast-forward to today, both partners now have to work in order to keep afloat.

This is a great illustration of why Toryism and laissez-faire economics are shit. Governments need to control housing markets one way or the other, otherwise our lives end up worse and the rich just get richer.

Those are literally the only ways house prices can fall in real terms.

Or denser housing. Or changing land use. Or less empty housing. Or…

But the truth of the matter is the housing ‘market’ is constantly ‘interfered’ with by governments to prevent large drops in pricing when it would otherwise be likely. And they’ll keep doing so.

Anyone would have thought they might have learned from 2008 that lending more isn’t always good for them or the customer.

Well they did learn for a few years and getting a mortgage in the few years after was definitely harder but they soon seemed to forget all about it and 2008 wasn’t really that long ago.

This is a great illustration of why Toryism and laissez-faire economics are shit. Governments need to control housing markets one way or the other, otherwise our lives end up worse and the rich just get richer.

how would you control them? if you (say) just limited how much someone could borrow, you’ll end up in a situation where folks have to move into a small house, then save up, then be able to buy the bigger house later on (rather than just get a mortgage on the big house at day one). This means moving more often and living in a smaller house for longer. Neither of those things sound like life is ‘better’?

Governments need to control housing markets one way or the other, otherwise our lives end up worse and the rich just get richer.

Governments are controlling housing markets to do exactly what you say they should stop

how would you control them? if you (say) just limited how much someone could borrow, you’ll end up in a situation where folks have to move into a small house, then save up, then be able to buy the bigger house later on (rather than just get a mortgage on the big house at day one). This means moving more often and living in a smaller house for longer. Neither of those things sound like life is ‘better’?

When people left school at 14 you could work, buy a house and have family in your twenties. now half the population goes to uni, they dont even enter the work force until 22-23. Give them a few years to find a spouse, save for a deposit, and they are into their thirties on their “starter house”. Yes fertility treatment has improved but the 21st century lifestyle has outstripped biology.

And you will still end up with people like my parents living just the two of them in a five bed country(ish) pile, becuase moving is a hassle and they like the garden.

If there were a massive price correction, I think its naive to believe that the ‘have-nots’ are the ones who would benefit from it.

A couple of random thoughts.

Whilst borrowing is cheap, most home owners are better of paying their mortgage than renting, so regardless of their circumstances and income, selling up really is a last resort.

The changes to mortgage interest tax releif for buy-to-let landlords should be putting a squeeze on profits, but again how many will sell up? The current suspension of evictions is actually preventing landlords from selling property.

Shortages and delays in supply lines due to Covid plus Brexit have the potential to cause inflation. Would interest rates be raised more than a few percent?

A government short of money could look at rent controls to reduce the welfare budget. This has the potential to really hit landlords.

The changes to mortgage interest tax releif for buy-to-let landlords should be putting a squeeze on profits, but again how many will sell up?

I think it makes new BTLs less attractive, but if your existing BTL is not highly leveraged, its less profitable but probably still more profitable than other options (if you can deal with the hassle). Additionally, it only applies to higher rate tax payers, and most small-scale BTLers probably have someone in their household who isn’t earning that much – either one of a couple being a part time worker or one or both being retired – thus the changes have zero impact on them

The thing is borrowing might be relatively “cheap” but banks are simply cranking up the minimum deposit requirements, so if first timers could each just rustle up an extra 20k (vs 6 months ago) that would be smashing…
That’s the same first time buyers already being stung by silly high rents while earning pretty much zero interest on savings, so even affording a deposit becomes a harder proposition. Well done housing and financial sectors you’re successfully **** a generation.

And yes I take the point above about dual income couples becoming the norm and therefore household incomes (rather than a single breadwinner) being the basis for house prices, except isn’t that just the housing market and lenders colluding over time to gouge “average” households for participating more in the job market? A step towards gender equality has just become an opportunity for the finance sector to extract more wealth from more people…

That pattern only serves to keep people relatively ‘poor’. Couples now spend such a high proportion of their incomes on first acquiring a house and then servicing a mortgage so they then start hammering consumer credit for other things, car(s) on PCP, holidays on finance etc, etc…

Imagine if housing in the UK were affordable? Consumer credit wouldn’t be quite so lucrative for the banks, neither would mortgages, people might actually live within their means, in fact banks would be smaller businesses, and we’d maybe not be so beholden to them? Perhaps…

The thing is those whinging Millenials didn’t create this financial circus focused on leveraging the basic human need for a roof over your head.
No it was their parents and grandparents generations born post war.
The same ones now sat in unattainably “valuable” properties banging on about the highlights from the last 50 odd years, how hard they had it surving three day weeks, 15% interest rates and Nigel Lawson…

Well guess what this lot are facing down a global pandemic, likely to see a record breaking recession/unemployment in the coming months, already get kicked with no fault evictions and their savings haven’t earned any interest in over a decade, I wonder what anecdotes they’ll be relating in 50 years time…

how would you control [property prices]?

Lots of ways but the simplest one is to build loads of really good social housing. That would suppress sale prices.

No it was their parents and grandparents generations born post war.

Only a very small number of those people were actually culpable for this situation. The ones in charge. You cannot blame everyone’s grandparents for this. They just did what they had to do.

Lots of ways but the simplest one is to build loads of really good social housing. That would suppress sale prices.

at the bottom end of the market, yes, but I’m not sure it’d affect nicer, bigger places in the same way. I’d still be competing against someone on a similar salary for a 4 bed house, cos neither of us want to live in a council estate?

but I’m not sure it’d affect nicer, bigger places in the same way.

Also seems to be a big shortage of nicer small houses – bit hard for boomers to downsize when they’re used to a bit of luxury and the only small houses are shit overpriced starter homes.

Round my way, all the decent old two bed stuff gets sold and then immediately extended, so plenty of poorly designed “family” homes but nothing smaller.

Lots of ways but the simplest one is to build loads of really good social housing.

I kind of agree, with the caveat of the ‘quality’ and ‘loads of’ leads us to the door of the big housebuilders. They have a vested interest to not build themselves out of a market through volume or quality. They’re not housebuilders, they’re shareholder profit makers.

at the bottom end of the market, yes, but I’m not sure it’d affect nicer, bigger places in the same way.

You’re assuming social housing needs to be cheap and rubbish.

I kind of agree, with the caveat of the ‘quality’ and ‘loads of’ leads us to the door of the big housebuilders.

It needn’t. The government could hire builders and architects itself.

Only a very small number of those people were actually culpable for this situation. The ones in charge. You cannot blame everyone’s grandparents for this. They just did what they had to do.

I’m not so sure TBH, where was the concerted challenge to the erosion of social housing from previous generations? how many governments got elected on a promise to make housing affordable, improve the rights of renters and keep landlords in check?

Nope several generations have voted for promises of “economic growth” which was substantially supported by house price inflation and at least one round of flogging off social housing…

Don’t get me wrong, I’m now very much part of the Problem. The offspring of a pair of empty nest boomers (still living in a 4 bed property they bought in the 90s). The owner of a pretty expensive house myself (as part of a dual income married couple), expecting it to gain value over the next decade or two, so we can eventually downsize (just like my parents planned oddly enough). I already see myself repeating many of the same problematic patterns, and I see how unsustainable it all is long term…

Ultimately you don’t stop the merry-go-round unless a generation is willing to vote against their own financial self interests, consider the prospects for younger generations and choose to support policies that don’t feed constant inflation of property prices…

The government could hire builders and architects itself.

Off on a tangent, but I am currently watching War Factories and they were pretty scathing of Atlee’s post-war Government, its attempt to nationalise everything and the striking collapse of productivity and quality in industry. I am not saying that history would repeat itself but our track record isn’t great.

You cannot blame everyone’s grandparents for this. They just did what they had to do.

True.

I can absolutely blame some of them for their shitty attitudes towards anyone younger and prettier than them, though.

POIDH

how would you control them? if you (say) just limited how much someone could borrow, you’ll end up in a situation where folks have to move into a small house, then save up, then be able to buy the bigger house later on (rather than just get a mortgage on the big house at day one). This means moving more often and living in a smaller house for longer. Neither of those things sound like life is ‘better’?

It’s called living within your means. Funnily enough that’s exactly the process many of the older folk I know followed to get into the houses they are in today.

I’d still be competing against someone on a similar salary for a 4 bed house, cos neither of us want to live in a council estate?

Council estates are no more. Up here anyway. New builds now have to incorporate a percentage of social housing into any development.

This surprised me.

The Rogoff/Yang 'Peak China Housing' paper doesn't cover a huge amount of new ground but it's a nice summation of the case. Figure 16 is a personal favourite among the many horrifying China housing finance charts. https://t.co/JTPH530jc7 pic.twitter.com/Func8fIqYq

— Mike Bird (@Birdyword) August 19, 2020

Rental houses will always be a popular investment. All the ones I’ve worked in recently have been paid for in full by people looking to make more money than they can from bank accounts no borrowing needed. The rental sector is not all BTL lots of it is straightforward investments.
If you live in an area you can’t afford to buy in move. If saving for a deposit sell everything and cancel your social life till you have enough money. Rubbish things to have to do but that’s life.

if you (say) just limited how much someone could borrow, you’ll end up in a situation where folks have to move into a small house, then save up, then be able to buy the bigger house later on (rather than just get a mortgage on the big house at day one). This means moving more often and living in a smaller house for longer.

Welcome to my world.

If you live in an area you can’t afford to buy in move. If saving for a deposit sell everything and cancel your social life till you have enough money. Rubbish things to have to do but that’s life

😆

Rubbish things to have to do but that’s life.

So what you’re saying is that things are shit when you’re poor and you should suck it up. A very Tory attitude.

If you live in an area you can’t afford to buy in move. If saving for a deposit sell everything and cancel your social life till you have enough money. Rubbish things to have to do but that’s life

It doesn’t have to be like that. Not many of the people who are buying their house are getting any benefit from it costing more. Uses up more of their money throughout a very long period and then when they own it they are typically old and a) could die or b) require care and have to sell it to pay for care. Not many people get to walk away with the money as still need a house to live in.

Wouldn’t it be better for everyone if house prices were a lot closer to how they were just 20 years ago, i.e. someone on minimum wage could buy at least a flat, whereas today a good salary would be required just for a very small flat (talking south coast here)

Not a Tory attitude at all molgrips but a realistic one. House prices aren’t going to massively drop. I spent two years in my first house with no heating a mattress and a chair as my only furniture as that’s all I could afford. If it makes you feel better to call me a Tory crack on. I could call you a lazy lefty wallowing in your own misery because your too lazy and unmotivated to make change in your life. I won’t though as I’ve never met you and don’t know you.

You forgot option e) Move to Cumbernauld.

I see it’s time for my annual ” Can you still buy a flat in my town for less than the list price of a Ford Focus?” challenge.

List price of a 2020 Focus ST = £30,575.

3 bedroom flat in a block* that some of my school mates lived in and still 300 yards from my parents house? = £29,995

https://www.rightmove.co.uk/property-for-sale/property-88488254.html

*Admittedly, I did once witness an Alsatian crashing through one of the top floor windows after it’s owners had made it join in with them as they sniffed glue, but, y’know, a house is a house.

Something’s just occurred to me.

There’s a lot of… shall we say “displeasure” about people buying to let. But is it such a bad thing? The problem isn’t a lack of housing, the problem is a lack of affordable housing.

If you want, say, a £150k property then in the current market you need to find a 20% deposit. That’s thirty grand. That’s a big ask for a lot of people – I haven’t got that sort of cash lying around now in my 40s, let alone back when I was in my 20s. A landlord fronts up the deposit putting those properties in reach of someone who can scrape £500 together.

Sure, like overdraft charges and credit card fees it’s once again taking more money off those in society that have none, but the alternative is what? Living with mum and dad until middle age, or buying some squalid flat in Little Beirut?

Wouldn’t it be better for everyone if house prices were a lot closer to how they were just 20 years ago, i.e. someone on minimum wage could buy at least a flat, whereas today a good salary would be required just for a very small flat (talking south coast here)

I do wonder whether there’s going to be a paradigm shift in location, location, location in the next few years.

In many cases people live where they live in order to be near work. I’m thinking particularly of things like London’s ‘commuter belt’ here. With working from home being the new normal for a lot of people, this criterion no longer applies and they could theoretically live anywhere. For the price of a London flat they could move 200 miles North and get a huge house.

What would that do to the market, I wonder?

where was the concerted challenge to the erosion of social housing from previous generations?

From memory, everybody was quite happy. Tenants were given a “right to buy” and took advantage of it. But before you start pointing fingers, would anybody on STW turn down the offer of getting an ex-council house cheap?

That right still exists for public sector housing. I know some people you are taking advantage of it, and who can blame them? So if you increase the stock of social housing, you’ll also need to remove the right to buy. I doubt any politician will do that.

If you live in an area you can’t afford to buy in move. If saving for a deposit sell everything and cancel your social life till you have enough money. Rubbish things to have to do but that’s life.

That’s a very simplistic attitude, not to mention defeatist. It doesn’t have to be that way.

That right still exists for public sector housing. I know some people you are taking advantage of it, and who can blame them? So if you increase the stock of social housing, you’ll also need to remove the right to buy. I doubt any politician will do that.

Once again, not up here. Right to buy was ended a few years ago and social housing provision is now a condition of any large scale development.

There’s a lot of… shall we say “displeasure” about people buying to let. But is it such a bad thing? The problem isn’t a lack of housing, the problem is a lack of affordable housing.

Because it comes back to affordability and this idea that all property is an investment. BTL landlord comes along and buys a cheap property and charges rent at a rate that pays the mortgage, covers maintenance (if they give a crap), covers a wage for his “work” and covers enough profit to afford the deposit for the next item in the portfolio. That rent is only going one way especially since its not regulated. This then pushes rental rates up, either gentrifying an area and placing it out of reach of those who live there or turns into slum housing, ultimately being sold via an improvement order and being bought up by a flipper and once again gentrifying it.

Meanwhile, the tenants want to buy a house since a mortgage costs less to service but can’t afford to save for a deposit and even if they did inflation is higher than interest rates. Then, if and when they finally get the money together for a deposit they fail the affordability check for a £150 a month mortgage despite paying out £700 a month for their current arrangement (this is based on a very true and very current story).

The alternative is regulated rental prices and more social housing but who would vote for that?