BS: House price crash in the UK?

Subject: BS: House price crash in the UK?
From: Prodigal Son
Date: 16 Sep 06 - 05:54 PM

I know that there are places on the web about this subject, but would value the views of Mudcatters, whose views I hold in a higher esteem (why, I don't know). I know there's talk of an immanent crash in the U.S, and a wobble in Australia, but will this spread to the UK? And if so, when?

Subject: RE: BS: House price crash in the UK?
From: Zany Mouse
Date: 16 Sep 06 - 06:15 PM

Sorry, my crystal ball is a tad cloudy at the moment!

Rhiannon

Subject: RE: BS: House price crash in the UK?
From: GUEST
Date: 16 Sep 06 - 07:15 PM

It's inevitable. When has it not happened in the past? Bubble's going to burst and then slowly inflate again.

Subject: RE: BS: House price crash in the UK?
From: Skipjack K8
Date: 16 Sep 06 - 08:55 PM

Can't see it as a crash, PS, even though the bottom tier of the market, the foundations of affordable first time housing, is as tough now as it was in the late 80s, the last time the bubble burst. Interest rates are less than half what they were then, and even though this week's inflation and retail sales figures suggest we'll see a hike in UK interest rates in November, it's unlikely, on its own, to precipitate a collapse.

Even if house prices do trend lower, with interest rates not really hurting currently, and the average affluence index higher than probably any time ever, negative equity suffers will just sit tight and force the market back up.

I felt very clever in the late 80s, as the crash was so easy to predict. I was bouncing around the Solent in a yacht, doing my skipper's ticket, the week after the great hurricane in October 1987. That was Black Monday, that followed the hurricane on the Thursday night before, and I naively thought that the slide was UK insurance stocks falling out of bed with storm damage claims on a pandemic basis! That was then and this is now. Then, first time buyers didn't stand a hope in hell of getting on the ladder, and the foundations of the housing market didn't exist.

Now, we are told the national housing stock is in deficit, and first timers are clubbing together or finding alternatives to get on the ladder, so no, with all of the above factors, I don't see a crash of any magnitude soon, short of any 'Events, dear boy!'

Subject: RE: BS: House price crash in the UK?
From: Liz the Squeak
Date: 17 Sep 06 - 04:19 AM

If the housing stock is in such bad shape, how come there are more empty houses in my area than ever before...?


Or is it that people are moving out to get away from the Olympic debacle that's trying to happen round here?

LTS

Subject: RE: BS: House price crash in the UK?
From: John J
Date: 17 Sep 06 - 04:34 AM

Property banks.

Across the road from where I work is a pile of dilapidated properties, nearly all vacant. The new owner of these properties has been snapping up the properties as they became empty over the last 20 years. When I became aware of what he was doing, he was buying properties up at around £20 - 30K, he is still acquiring but he's having to pay £150k for identical properties. The plot is worth millions.

The financial wizards are always saying it's not wise to put all your eggs in one basket (eg Property), but the long term results of investment in property are consistently good. Even if the property market does wobble / dip / crash even, it will soon be on the up.

There aren't many other markets that can give you a return on your investment (letting your property out) whilst the value of the asset (generally) increases.

I hope to hell I'm right, I've kicked my pension contributions into touch and I'm putting the dosh into property.

John

Subject: RE: BS: House price crash in the UK?
From: Tootler
Date: 17 Sep 06 - 04:43 AM

Where I live builders seem to be either building 4 and 5 bedroom detached or flats which they sell at ridiculous prices.

At the same time, the council seem hell bent on knocking down affordable housing - all in the name of "progress", of course.

Personally, I am worried that first time buyers are being priced out, though my wife suggests that their expectations are often unrealistic.

I think a dip in housing prices would not be a bad thing if it enables people to get on the ladder.

If you price first time buyers out, then a crash is inevitable.

Subject: RE: BS: House price crash in the UK?
From: Gervase
Date: 17 Sep 06 - 05:50 AM

House price crash? Damned good thing! Most property in the UK is ludicrously overvalued, and the steady growth in prices has encouraged an extraordinary amount of greed - not to mention an extraordinary amount of vandalism to our housing stock as idiots put in plastic windows and the sort of hideous MDF monstrosities seen on TV make-over shows in an attempt to 'raise its value'.
What's worse is the rush to demolish older houses instead of refurbishing them. Great tracts of Manchester and Coventry are like ghost towns awaiting the bulldozer, yet they could be transformed into decent, affordable housing for a fraction of the cost (financial and environmental) that will be spent on 'redevelopment'. But the profits aren't nearly so high for the developers, so down they must come.
That's vandalism on an epic scale.

Subject: RE: BS: House price crash in the UK?
From: Big Al Whittle
Date: 17 Sep 06 - 06:03 AM

It was difficult to get on the property ladder 35 years ago when I got married. It involved two incomes for most people. Its always been a question of getting a foot on the ladder, and living where there is work. A delicate balance.

We used to get married younger - which may have been a mistake. But it meant that that our expectations were lower than kids seem to have nowadays - we felt lucky to afford any old dump and be away from our parents.

I can't see the places in the UK losing their value in world economic terms - look how many people want to come and work here, and contrast with how little the place is - short of a nuclear war(which would affect the desirability of the UK as a place of residence) - that means the supply will always outstrip the demand. You can't buck the market.

Subject: RE: BS: House price crash in the UK?
From: GUEST,Rob
Date: 17 Sep 06 - 08:30 AM

This might be of interest.

http://www.telegraph.co.uk/opinion/main.jhtml?xml=/opinion/2006/09/15/do1501.xml&sSheet=/opinion/2006/09/15/ixopinion.html

Subject: RE: BS: House price crash in the UK?
From: Nigel Parsons
Date: 17 Sep 06 - 09:55 AM

Telegraph link

Nigel

Subject: RE: BS: House price crash in the UK?
From: John MacKenzie
Date: 17 Sep 06 - 10:53 AM

If letting was simpler and more affordable perhaps things would change. Property owners won't rent on a long term basis, or 'unfurnished, as that makes it harder to get tenants out. On the other hand, when you get bad tenants getting rid of them is difficult and expensive.
It should not be beyond the wit of any government, even this one' to build houses to let, on a similar basis to that done by housing associations now.
If a way can be found of discouraging people from buying houses on borrowed money, to do them up on borrowed money, to rent out to pay the mortgage, and then sell at a later date, at a vast profit to fund their retirement, then house prices would drop immediately, and financial investmenst would pick up. I've heard of people who won about 5 properties on this basis, who can't afford to pay their everyday debts.
I think a drop in house prices would be a good thing in the long run, don't forget, like price increases, it's the same for everybody!

Giok

Subject: RE: BS: House price crash in the UK?
From: Big Al Whittle
Date: 17 Sep 06 - 11:57 AM

The Torygraph article seems like the usual laissez faire tory crock of crap that applauds inertia, and charging the poor and extra quid for breathing this week. we tried doing sod all and keeping wages low, for 18 years.

Of course you can only judge by local conditions, but round here they have just approved a whole tranche of planning permission to build factories, warehouses, etc - the bit of derbyshire from heage to belper.

You can still buy a terraced house betweeen 8o and 100 grand. The local economy would seem to be booming. The only casualty, as far as one can see, is the environment.

How to make the economy boom and still leave enough room for us to walk round without bumping into each other is the real question.

Subject: RE: BS: House price crash in the UK?
From: George Papavgeris
Date: 17 Sep 06 - 12:31 PM

Going back to the original question - whether a house price crash in the US might spread to the UK:

House prices are affected mainly by two factors: Availability of desired housing (the old supply-demand bit) and availability of funding (whether by savings or by banks). Of these, the second might conceivably spread from one country to the other, especially as the two economies are linked; but the first - which in my view is the strongest factor of the two - is mainly regional, and cannot eaily be translated to another country except where mass immigration might be involved (say if prices fall so much in the US that a lot of Brits decide to emigrate there; not very likely in my opinion).

So I can't see a domino effect, which is what the question was about. And indeed I cannot recall any such domino effect between countries in the housing market.

Subject: RE: BS: House price crash in the UK?
From: Mr Red
Date: 17 Sep 06 - 05:23 PM

House prices are dependant on available cash. In the late 80's it was greedy estate agents and the like trying to sell you a house AND a loan - why did people think that giving the gazumper all the details of your income was not important?

I was telling the estate agents then they could sell me a house or a mortgage and they got to choose which. They acted all innocent! To a person.

Now it is the parents of first time buyers adding to the crass availability of loans. Apparently there are a lot of parents with disposable income helping their offspring with deposits. If money is availanble - up goes the price. House is synonymous with home - logic has less influence than emotion. Add in the immediacy "young world" expect and you have price pressure upwards. As soon a interest rates go up and mortgage foreclosures become more common place again and a dip in world economy hits because of rising fuel prices ............

And given that there is too much heat in the housing market - it doesn't take an expert to see a dip in the market. Now it is a clever or gambling man that bets his savings on when that happens. But I predict it will. I have seen too many in my time. Say every 15 years with a mini blip half that. Because it takes about a generation who haven't felt the misery of negative equity and redundancy.

On that basis we are due a crisis any year now.

Subject: RE: BS: House price crash in the UK?
From: George Papavgeris
Date: 18 Sep 06 - 08:15 AM

Agreed, Mr Red - it may well happen; almost certainly will. But it will be because of shortage of funds - not because of a domino effect from the US housing market or wherever.

Subject: RE: BS: House price crash in the UK?
From: Paul Burke
Date: 18 Sep 06 - 08:29 AM

There is a historic alternative to a house price crash. That's when the adjustment happens through a sudden burst of massive inflation. I bet that happens the week before I'm due to collect my (private) pension.

Subject: RE: BS: House price crash in the UK?
From: Prodigal Son
Date: 18 Sep 06 - 03:05 PM

Thanks for all your posts, I knew mudcatters would have some sound views on this. Please remember this thread and add to it when you see any interesting developments, or that crystal ball clears a bit Zany Mouse!.

Subject: RE: BS: House price crash in the UK?
From: Donuel
Date: 18 Sep 06 - 03:07 PM

The timetable for a price crash for homes that were inflated at twice (or more) their actual value will be at a time when most of the mortgages are half paid.

That way banks can get full value on the house, foreclose, resell and double their profits.

Its sort of a have your cake and eat it business model.

In short it should take another 7 years to maximize the banks advantage for homes that were 7 or more years ago on 30 year mortgages.

Of course a bubble burst about now for 15 year mortgages would already be in the banks favor.

Subject: RE: BS: House price crash in the UK?
From: SINSULL
Date: 18 Sep 06 - 04:43 PM

Building is down and house sales slow here in Maine but prices are still high. And with the rise in interest rates, owning a home is out of the question for most young families. Add to this that many signed on for adjustable rate mortgages and now are seeing their monthly payments double.
But a crash? No. It will sort itself out. Just not a seller's market any more.Some sellers are choosing to wait out the famine hoping for a better price.

Subject: RE: BS: House price crash in the UK?
From: Becca72
Date: 18 Sep 06 - 04:59 PM

As someone who works for a real estate attorney in Maine I can tell you that a large chunk of the people from 2 and 3 years ago who signed on for 80-20 adjustable rate loans so they'd only have to put $1000 down are now going through foreclosure because they couldn't afford it in the first place and now they're payments have doubled and tripled. This time last year there were 14k homes for sale in this state. Right now there are 26k.

Subject: RE: BS: House price crash in the UK?
From: Fibula Mattock
Date: 18 Sep 06 - 05:08 PM

I've just let my house (actually I only own half of it) to tenants as I had to move for job reasons. I had to sign up to a new mortgage to enable "consent to lease" from my mortgage lenders (alternative was paying a whopping great fee and a buy-to-let mortgage). I suggested a fixed rate mortgage. Co-owner of my house said nay. Damn, am I regretting giving in! The tracker deal we got isn't bad, but unfortunately I can't hike up the rent when inflation increases (again). I'm not out to make money on my property - the main reason I didn't sell was psychological/emotional (I like the idea of having a permanent home). In fact, I don't make enough from renting it to cover the mortgage. If I get off the property ladder I'll never get back on...

My ex has seen a 100k price rise on houses in his area since he bought in Dublin over a year ago. There but for the grace of god go I!

Subject: RE: BS: House price crash in the UK?
From: Grab
Date: 19 Sep 06 - 08:20 AM

When we bought our two-up two-down end-terrace in Cambridge (in a council estate), it cost £87k. We're going to sell shortly, and it'll probably go for about £140k. OK, we've done a lot to improve it, but we've not spent that much! I've no objection to relieving someone of their money if they want it that badly, but there's no way we're going to buy - we want somewhere bigger, and even a moderately-priced semi is going to overstretch us.

No, the money's going into some high-interest account until we need it, and we'll sit this one out until either prices come down or inflation pulls the numbers up.

Graham.

Subject: RE: BS: House price crash in the UK?
From: McGrath of Harlow
Date: 19 Sep 06 - 06:55 PM

It'd be rough on people who've had to get massive mortgages to pay for modest enough houses, like my son, and are liable to be lumbered with that whatever happens to the house prices, which could mean enormous "negative equity".   

But this system, under which house prices keep on going up into the stratosphere, is ridiculous and causes terrible damage to us as a society. Somehow it's got to be put into reverse, so that it's possible once again for young people to get a reasonable place to live in, without having to break their backs to meet the payments.

I think the whole move away from as a society where we had modest priced renting for most of us to one where it's crippling mortages all round has been a social disaster. And the way of thinking that sees houses as property to be used as a way of making money rather than as homes to live in which gets peddled constantly in TV programmes which I switch off when I can eventually find the remote strike me as faintly disgusting.

Subject: RE: BS: House price crash in the UK?
From: GUEST
Date: 19 Sep 06 - 07:23 PM

I generally agree McGrath, but with my wife's pension and mine being hijacked by crooks and liars our house is now our shield for old age costs.
We've screwed our children though. They can't wait for us to die.

Subject: RE: BS: House price crash in the UK?
From: GUEST
Date: 19 Sep 06 - 11:39 PM

Financial Times reports an expected 20% minimum drop in residential value over the next 24 months as adjustible interest rates rise for low qualified borrowers and forcloseurs mount on those who pulled equity out of over-valued properties. Banks are not in the real-estate business and will quickly unload leveraged debt.

CRASH - No

ADJUSTMENT to fair-market-value - YES

Subject: RE: BS: House price crash in the UK?
From: Paul Burke
Date: 20 Sep 06 - 03:44 AM

Fair market value is what people will pay. That's what a market is. The problem is when markets develop on false premises (pun?), like the Soutyh Sea Bubble, the Dutch tulip craze, the dotcom mania etc.

The housing market is an unfortunate development, in that mass ownership of housing began (in the UK) in the 60s/70s at a time of high inflation. People were encouraged to over- mortgage on the grounds that inflation would soon make it affordable. This necessity for a big increase in valuation after a few years has led to a self- inflating spiral. Indeed, house-price inflation is still at the old 70s/80s rates long after general inflation has dropped to a much smaller figure.

No politician can afford to take the obvious corrective action- capital gains tax on house sales- because so many people have invested so much of their lifetime's earnings in their house. And they can always claim that periodic crashes are the impersonal market in operation, not their fault at all.

Subject: RE: BS: House price crash in the UK?
From: Mr Red
Date: 20 Sep 06 - 12:22 PM

It is the availability of cash that pushes-up prices.

And greed all round just magnifies it. People increase their mortgage to release capital and that is a relatively modern phenominon. Credit card debt is not seen as a problem.

My mother's era was the depression and the aftermath and the war years. Her philosophy was to not take on debt or pay off quickly and not have if you can't afford. With good reason.

I inherited that - but it will take a mighty crash to engender that culture country-wide again. The state must bail-out the unfortunate - is their watch-cry.

We the careful are the "state". The unfortunate include the unthoughtful. There is no justice - if we don't "bail them out" society suffers.

Who said fair?

Subject: RE: BS: House price crash in the UK?
From: GUEST
Date: 20 Sep 06 - 04:37 PM

a mighty crash will probably take your pension with it.

Subject: RE: BS: House price crash in the UK?
From: GUEST,number 6
Date: 20 Sep 06 - 04:41 PM

The ever growing weight of the "Mother of all BS Threads" thread will eventually cause the Mudcat and everything else on this tired old earth to crash.

sIx

Subject: RE: BS: House price crash in the UK?
From: JohnInKansas
Date: 20 Sep 06 - 04:48 PM

I found in the newspapers that accumulated during my month at festival the comment that UK prices on "luxury housing" have soared. There was no comment about general housing prices; but the blame was placed on "rich foreign" buyers who have driven the high end prices to spectacular levels. Immigration of a majority of buyers in this class was implied, but not actually stated.

I would suspect that an unusually large influx of new persons would affect the high and low ends of the housing market somewhat similarly, perhaps resulting in increased competition for housing at either end of the "moderately priced" range(s), but I don't have any real data to support that.

FWIW.

John

Subject: RE: BS: House price crash in the UK?
From: Liz the Squeak
Date: 20 Sep 06 - 05:26 PM

I'd really be in favour of a tax on empty second homes.... all those houses out there that are only lived in for a couple of weeks a year.... when there are so many in need of affordable and sensible housing. Why does a family of 4 need a house with 15 bedrooms, Mr and Mrs Beckham?

LTS

Subject: RE: BS: House price crash in the UK?
From: GUEST,number 6
Date: 20 Sep 06 - 06:05 PM

If the Beckhams have the money, let them ... it's the family of 2 parents, 2 kids in Missassauga Ontario that have mortgaged themselves beyond hope because they have to have that suburban 5k sq. foot house that I think is a waste.

sIx

Subject: RE: BS: House price crash in the UK?
From: Liz the Squeak
Date: 20 Sep 06 - 06:15 PM

Just heard on TV that newly signed football players to Chelsea FC are getting upwards of £13,000 A MONTH for playing a silly game.

Of course, their careers will be over in a couple of years, but I'd like to be on that sort of wage for 20hrs work a week.... reckon I'd not do any worse than some players on our national team...

: )

LTS

Subject: RE: BS: House price crash in the UK?
From: Mr Red
Date: 21 Sep 06 - 01:28 PM

When the world economy slumps - everyone suffers - pensions, house prices, work. The thrifty will manage, just, and the spendthrift will expect it all to be done for them.

Mind you gold will increase in "value" and it did by 13% last year - make of that what you will.

Crash is an emotive term - it only takes a small dip to become a big one. How much did Katrina cost in money terms - let alone the cultural devastation. Factor in a natural (Katrina was man assisted) disater like a Krakatoa and you will have crop failure world wide until the dust settles. The evidence for it is there if you look. The Thames freezing over in winter summer that never shone.

Subject: RE: BS: House price crash in the UK?
From: breezy
Date: 22 Sep 06 - 04:08 AM

and when you reach a certain age and you are made redundant,

repossessions are on the increase.

people who 'club' together wont be any different to a married couple who decide to go their separate ways.

new ways have been devised in recent times to encourage borrowing as it was slowing, so lenders and agents can earn commission.

Foriegn money , possible funny money, as well as parental support, with very low interest rates for so long, lets not kid ourselves if mortgage rates returned to 8% or higher there will be fun.

My mortgage went from 8% - 15% for most of my repayment period. the last 15 years they've been giving it away, lucky for some, but I'ld be watching closely, as There Could Be Trouble Ahead