| Archive for Downsizer For an ethical approach to consumption |
| bodger |
Do people think that property prices are likely tofall in the near future ? and if so when, and by what sort of percentage ? |
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| Frewen |
I do hope so - I know that's selfish but we could really do with a little more space 
I get the impression that the housing market is slowing but there are so many little ruses to get people onto the property ladder I don't think there will be a huge crash any time soon. |
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| Jamanda |
I hope so too. It is needed to put house prices back in to the reach of those on normal sized incomes. | ||||||
| Cho-ku-ri |
I've heard suggestions that they might drop as much as 33% 
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| vegplot |
Yes, I think they will continue to fall but then stabalise. The money markets don't want it to happen as it will disrupt the economy. The risk is whether a fall now turn quickly into a collapse as that would be disastrous. | ||||||
| Rob R |
'Course it will, they are highly inflated at present & much of that is on credit. GB thought he could change the laws of economics (or he thought he could fool us that he could). People wanting to sell second homes with increase the 'supply' I would think. | ||||||
| Jonnyboy |
No, I don't think they will. There may be a soft landing and some regional variations but I think there will be some stagnation and small percentage increases.
A recent study showed that investor demand is still putting a premium on first time/rental properties. |
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| Fee |
I don't think it's going to fall too much here...in fact, looking at the price houses like ours in our area are going for (just checked), they're on the way up again! They've been pretty stable for the past year or so. | ||||||
| sean |
Dunno. I get the impression that sales are stagnating a bit round here. A lot of properties seem to be on the market for a long time and I know that one of the town's estate agents just made someone redundant. | ||||||
| RichardW |
I think the national average will fall.
First time homes will rise Big homes will fall Some areas will have huge drops Some will still rise as they are very low priced still In our locality I expect the under 100k homes to still increase lots the 100-200k homes to increase slightly the 200k-300k homes to stagnate the 300k-400k to drop slightly & be slow to sell the 400k plus homes to drop by double the % of the 3-400k ones & not sell at all Not that I have thought about it..... Justme |
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| LynneA |
I suspect that prices will drop a little, so some mid range houses will be in danger of negative equity, leading to the danger of repossesions.
Once the bank have repo'd enough to have a decent property portfolio, they'll reinflate the market and the cycle will start again. |
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| Treacodactyl |
On average I think things will stay flattish but there will be differences in areas and types of property in those areas.
Interest rates are falling now so if no more bad news crops up you could see some rises, but if something else crops up who knows? |
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| MarkS |
Yeah, but you're in cuckoo land! I think fall and in many places substantially. Around us property is selling much more slowly than the last few years. Some big price drops (next door to us has just been reduced from 400K to 350K). Look at the salaries, look at the increased difficulty in getting mortgages - OK I only have anecdotal evidence but I've heard a few people say that they cant get very good deals any more. look at the salary multiples needed. A one bed (its on the other side of us - note to self: check for bad BO) is up for an asking price of £170K How can anyone afford that without already owning a house?
Others in our village include 2 bed terrace £225K, 3 bed £350K. Yet the typical salaries in the local paper are all low £20K's |
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| JB |
I suspect they'll fall. How much? difficult to say but the drivers for that are that property prices in the UK are stupidly overpriced so a fall of 30% or more could take place and property would still be overpriced. Against that is that there is a culture of property owenership in the UK which will always act to inflate prices. We bought only last year so we wouldn't benefit from a fall in prices but although it might be hard for some people it would be a good thing for the country overall if property prices fall. | ||||||
| bodger |
I was thinking that the increase in repossesions might see the banks getting rid of the housing and being being only too pleased to get their money back. I was hoping that this would lead to a few bargains being on the market in the next twelve months..
See ! I still don't know when to spend my wad ! 
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| Treacodactyl |
The capital gains tax changes coming in this April might also have an impact. | ||||||
| Vic |
This is pure anecdotal evidence (but what else can you use)?
My sister's 2 bed house in Bristol has been on the market since November. She's had lots of viewings and one, very low, offer. 5 years ago she sold a very similar 2 bed terrace house in Salisbury with about 2 weeks - she had several offers and it went to sealed bids! All the advice she's had is sell as fast as you can as the market is dropping... but it's proving very hard. If you know anyone who wants to buy a nice house in Brizzle, contact me!! |
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| bodger |
The capital gains tax is going to have a massive impact on property deals, in as much as the seller is going to have to pay more. I've just signed a deal that if left until after April would have seen me paying £13,000 more tax than previously.
How do you think this will affect house prices though ? |
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| bernie-woman |
That is what I think too - we seem to be seeing prices dropping on certain types of housing round here like city centre flats partly due to too many developers trying to make money and there are too many 'urban living' flats now |
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| Helen_A |
Market prices are definately dropping around here, but I think that that is in part because there are actually a *lot* more properties on sale than people to buy them. The new build market is definately slowing down (flats are selling built now for quite a lot less than they cost off-plan, so there are a lot of buy to let fingers than have been burnt). Houses in certain bits of the town are now going onto the market for 25% less than they were 6 months ago (there are 4 bed houses here on the market for under £100K, but not places that many people actually want to, um, live...)
We got this house for a sensible price (as in, a lot less than the asking price) because the market had fallen between it going on and when we offered, and the sector that it falls in has stagnated price-wise but things are still selling in around 6 weeks (mid 70's built stuff). But we've realised that we are going to need to move our mortgage somewhere else as our rate is bleurgh! all of a sudden compared to most banks whereas it was a good rate back in July! I think that it is in rates where most of the adjustments will be made, as the banks are moving to individual offer much much more than they were. They are also now wanting much bigger deposits, than they were, if you are borrowing more than 2.5 household income (does anyone borrow that little these days?)... Helen_A |
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| Treacodactyl |
For many people they will be much better off selling after April. So there might be a sudden increase of properties for sale. |
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| Slim |
Definitely tanking over here. (  )
I'm hoping that by next summer I can make my first property purchase and get a duplex for under or around $100k (bear in mind, I'm looking for something I can improve as in investment, & property values aren't all that high in my town anyway) |
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| JB |
What is a duplex? |
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| bodger |
Two condom iniums ?
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| vegplot |
I thought it was a type of printer or photocopier! | ||||||
| Slim |
It's a house split into two units... Sometimes an old house that's been retrofitted as such, and sometimes an old house that was built to be a duplex. The plan is to rent one side to college students to pay the mortgage, while fixing up the other side, then switch sides and fix up the other. Then see where I'm at as to whether or not I want to sell it or just keep it or whatnot.
At any rate, it's a bit of a far-off dream right now... but it would be nice to be closer to work (4 miles of hills closer...) so I would be more likely to ride my bike in... |
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| James |
The average weekly wage is £457 ( http://www.statistics.gov.uk/cci/nugget.asp?id=285 ).
If you assume that there are two incomes in a household, and the mortgage is three times each salary giving 6 times household salary, the average mortgage should be £132,000 tops. A safer bet is more likely 4.5 times household salary, which would give a mortgage value of £99,000 What would you get for under £100K? not a lot. So, relative to incomes, I think house prices are way over inflated. Whether that means they’ll crash, which they may if unemployment and re-possessions increase, or whether they’ll just wobble around at the current rate but other costs will inflate, I’m not sure. I’m leaning towards house prices stagnating, but other costs increasing, with an increase in inflation, and therefore a cost of living increase in salaries. Its semantics really: will we see an actual drop, or will we see a relative drop? I’m sitting tight and throwing money at mortgage as fast as I can. |
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| RichardW |
£457 x 52 = £23764 times 2 people = £47528 time mort multipul of 3 = £142584 Plus any deposit avaliable But still not a lot. I know its an average but its done on total people over total wages. Better way would be number of people in each wage band. Then it would show what most people earn. Would show a much lower average number. Justme |
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| dougal |
There's no change on capital gains tax on your main residence. (Still zero.) Where there is a really evident tax reduction, its on residential property held as an investment by a private individual, (ie *not* his home), and particularly if bought more recently than 1998 (so no indexation allowance). And the more recently it was bought, the less taper relief there would be. Hence, the classic buy-to-let landlord may indeed be hoping to hang on until April before selling -- so as to get the lower tax rate. I think one would have to be very optimistic to expect property, over the next few years, to appreciate in value, when taking inflation into account. However that doesn't take into account the income that the property should generate as well as its capital value change. Personally, I think we'll see prices falling a bit in simple £ terms. As to how much, any justified opinion is valid. The problem is that the risks are hidden and unquantifiable. How much fraud has been going on with "refunded deposits" and such tactics to justify higher valuations? How much remortgaging went on as homeowners converted paper valuations into 'secured' debt plus cash-for-spending? Who knows. My estimation is probably higher than most people's, so I'm probably towards the pessimistic end. |
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| Treacodactyl |
Looking at what people spend their money on though, mortgage payments for many are still very affordable. Hopefully sensible people have been putting some money aside. There's still a huge demand for housing in the UK so even if prices fall for a couple of years I can see them bouncing back. Perhaps a little selfish of me but does anyone know what will happen to land prices or properties with land? With food prices rising I can see them holding up or rising unfortunately. |
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| Jamanda |
I beg to differ. Mortgages are completely out of the reach of many. And if people have to pay rent, it can be impossible to save up anything like the amount needed for a deposit. I live in a relatively cheap part of the country, and know couples, both in good secure jobs who can't even contemplate even a 2 up up 2 down. I'm sure everyone knows young people in that situation. | ||||||
| woodsprite |
We're one of those couples Jamanda. Rents are so high that even earning a relatively goodly amount doesn't leave us anything to save.
Theres no prospect of us ever owning owt again  . Youngest has a farmhouse tied to his job and eldest is about to move down to the smoke to live in a shoebox with several other youngsters.
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| AnnaD |
They are certainly completely out of my reach. Between us we make about £34000 a year, and all we can afford are flats in really dodgy areas. It's all very depressing since we rely on buying a house in order to make any of the lifestyle changes we want.
I'm sure I heard that the house prices are unlikely to fall much if at all in the Edinburgh area. It's not a great place to buy a house unless you have a very good job. |
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| Rob R |
I wonder how many thousand lambs I'll have to sell before I can afford anything 
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| Treacodactyl |
I'm referring to the affordability of the repayments by people who have mortgages, not people trying to take them out. IIRC it's about 20-25% of household expenditure. |
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| Ani |
I study housing as part of my masters. According to our lecturer prices should've crashed years ago, but due to an increase in students people buying to rent kept the market inflatted, then the arrival of a lot of the immigrants kept them sustained after the inflation of the students, but now he says we're verging a crash and should do so, so long as no other unforseen factors come into play. Also HMO's are hard to keep/ pay for partly due to legislation so the buy to let market seems to have reached its peak too. Though we do have a general housing shortage in the UK only £22million homes to like £66 million people. Though these people also seem to agree with the integration of social housing into all new estates and favour barret box homes with no gardens so cant really take what they say as gospal | ||||||
| Jamanda |
But what affects the housing market isn't those of us lucky enough to have bought in at the right time and already living in houses with significant equity, but those trying to get into the market for the right time. And many of them are stuffed unless house prices fall back to a realistic level. Presumably that 20 to 25% includes people who bought 20 years ago and are coming to the end of £20 000 mortgages. That wouldn't even be a deposit today. And those older people will be earning more than youngsters too. |
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| Treacodactyl |
All sorts of things affect the housing market, existing people moving, (upsizing, downsizing & moving about), people buying second homes, buy-to-let-ers etc, etc. There's still plenty of money about and with savings rates not being great, the stock market not performing that well I can still see many people investing in property, especially long term. |
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| Blue Peter |
It is obviously impossible to know what will happen in the housing market, however, it is possible to make some educated guesses.
It's first worth saying that the housing market is a very illiquid one, so changes tend to be slow. It's not like a stock market crash - the last one took 6 years (1989 - 1995-ish)? Secondly, prices are set at the margin. This means that the market price is set at the price a comparable house was last sold at. When it says that houses rose 10% last year, or whatever, it doesn't mean that everyone sold their house for 10% more, it means that of the people who sold, sold for 10% more. Similarly, when house prices fall 10%, not everyone sells, only those that sell, sell for 10% less. So, it only requires a few people to need to sell quickly for this to bring all house prices down. Thirdly, as already noted in this thread, most people buy houses with credit i.e. a mortgage. Given people's nature, they tend to spend all they can borrow on a house (BTW, this is not very good for an economy as a whole), so house prices are very dependent upon the amount of credit available. So, the question of house prices tends to be the question of credit. Now, we know that up until recently, you qualified for a mortgage if you could fog a mirror. That is no longer the case. As you will remember, there was something called a credit crunch at the end of last year, well, it’s still going on, and it is not going to stop for a while yet – and when it does, money will not be as freely available as before. So, we see: Mortgage approvals down (I think that December, non-seasonally adjusted was about 50K); The end of the 125% LTV (loan to value (of house)) product. Usually this was, I think a 95% LTV mortgage and then a 30% unsecured loan. These have gone this week; Northern Rock is now looking to downsize itself (I wonder if it will join here). It is setting its rates to discourage new customers and drive away customers who try to remortgage (it can’t do much about the 125% ones, since no one else will take them – I suspect it was this NR effect which led to every other lender else ending their 125% loans this week). Just before the credit crunch began. NR was responsible for 20% of the UK mortgage market. So, this will take away a huge chunk of lending, and it will also mean that everyone else left won’t have to compete as hard; Lenders are no tightening up their lending practices, so no more inflating your salary on your mortgage application. LTVs are going lower, and I bet that they’re instructing their surveyors to survey down; Finally, because of the credit crunch, banks just don’t want to lend as much. Remember all those Egg customers complaining that they had had their credit card withdrawn but they were good customers. I suspect that Citibank (badly hit by the crunch) simply wanted to reduce their lending commitments. If they issue a credit card with a 5K limit, they have effectively set you up with a 5K loan facility. If they don’t want to make loans, that’s a danger to them suddenly having to do so. So, pull that card. Thus, I think that there will be an awful lot less credit available; people are also very indebted, so if they need to sell, they will find it hard to find someone able to pay the current credit-induced price (or if they can find someone (X) to pay the price, the chances are that X will find it hard to find someone to pay their price). Therefore, they have to reduce the price…and prices are set at the margin, so this reduced price is the new market price. All of this is a recipe for a downward spiral of house prices. But, who knows, Peter. |
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| bagpuss |
that is a very enlightening post about the situation
thanks |
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| bernie-woman |
As an aside but related I rang our local court today to book two of my clients in for bankruptcy - ever since I became a debt caseworker I have always managed to get bankruptcy petitions booked in within a couple of weeks max - today the first free slot was 31st March  I asked the listing clerk what was going on and they said they have never seen so many bankruptcies and have two booked in every day 
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| RichardW |
Our local paper has about 30% of the house listed as "reduced"
Justme |
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| Treacodactyl |
Or perhaps, according to the BBC, they are allegedly using the current financial problems as an excuse to increase their profits by getting rid of people who pay off the cards in full each month? http://news.bbc.co.uk/1/hi/business/7264344.stm An interesting bit about the state of the buy-to-let market, seems a bit too optimistic to me but it says the market is "still thriving". http://news.bbc.co.uk/1/hi/business/7264519.stm |
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| mark |
my predictions
flats will be hit hardest - especially the "city living" overpriced fashionable appartments. In many areas there are two many of them and they have been bought by buy to let landlords - however and they are not attracting the rich young professionals as tenants as promised - but ending up with the urban poor instead so the landlords are being forced to sell adding to the glut. the buy to let landlords if they are sensible wil shift their investment to houses so may buoy up the market for a little while. otherwise things are regional and the market will prevail - if you are in an area where their is a shortage of family housing then family housing will remain expensive (this is due to a failure of planning policy and approval of too many high density flats in urban areas and not enough family homes) during a slump there is no rush to get on the housing ladder so buyers become fussier and choosier - people can only afford to drop prices so far - so houses in unpopular areas become really hard to sell. interest rates - well i think they will rise - politicians and banks have held them down to avoid the economic consequences of a credit crunch but this is a short term fix - to my mind the economic signals suggest interest rate rises and inflation are on the way |
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| Blue Peter |
Could be, could not be. Do we know for sure that the credit card companies make no money on people who pay off every month? They make 1 - 5% per transaction, which seems like easy money for simply sending a bill.
I don't think that it's quite so dramatic as it may look - 1% more mortgages than the previous year:
But remember, this is a slow market...it's like an oil tanker turning, and the credit crunch only began at the end of last year, Peter. |
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| Treacodactyl |
I know, I know but there seems to be some news filtering through of the market picking up a bit even before large scale falls. Personally I'd like it to fall although I'd settle for a bit more certainty of what's going to happen. |
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| Blue Peter |
But that wasn't news of things picking up now; that was mainly news of things at the peak of the boom. In fact, I've seen someone suggest that that is actually good news. Fred Harrison uses the term "winner's curse" - you've won, you've got the most expensive property (on average) that this country has ever had. Well done! The problem is that, there isn't the money to support that price any more; it's going down. Bad luck. So, in general, people who borrow heavily to purchase a property, and whose only reason for doing so is capital gain, pushed the market higher in 2007. What will happen when credit tightens and they have a capital loss rather than gain? Especially if the rent is not covering the mortgage payments... Peter. |
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| MarkS |
Yep!
I'd also make the point that the media coverage of BTL in the last 2 years has really ramped up. There are a lot of people who have gone into the market in that time with NO decent understanding of what they are doing. Someone said that when you're looking at investments, if its being featured in the mainstream press then you're too late. |
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| Treacodactyl |
I wasn't necessarily referring to that story but rather the fact that mortgage rates are falling now from their highest levels. Interestingly that story did mention that default rates on btl properties are lower than all mortgages. Also there seems to be a reasonable demand for people to rent property and if people are worried about house prices falling I can see demand for renting at least staying level. I agree that btl does seem more risky than it's done for a while but not sure that market will crash. |
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| AnneandMike |
Some mortgage lender today announced that they would lend a maximum of 75%. If that doesn't mean they expect prices to fall, why would they do it? | ||||||
| RichardW |
I think thats because lots of ex NR customers are looking for better deals after their deals ended. Its causing major ripples. Justme |
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| wellington womble |
What's changed? My BTL is harder to let, but I though that was local changes - A lot of posh housing for students has just gone up locally, and they don't want houses so much. It's let for September, and it wasn't a struggle, but we weren't beating potential tenents off with a stick like in previous years. |
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| MarkS |
Summary of CGT change at the bbc http://news.bbc.co.uk/1/hi/business/7037161.stm Taper relief finishes so for many people selling now is better. For people who have held assets for a short time and who wish to sell then april is better than now. The word is that the IR will be pushing cgt much more - lots of btlers have apparently not been declaring. CGT is payable on all property dealer which are not your main residence. I know they've done stuff about improving their interaction with land registry to pick up people who own multiple properties for example. |
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| Treacodactyl |
As ever, the tax rules are rather complicated in this area. Whether you're better off now or after the changes depends on a fair bit. This might be useful as it relates to property: http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/10/16/cmtax116.xml |