Property Market Price Outlook

[Tara]

Not a Ponzi scheme, it is simply supply and demand.

Demand exceeds supply, so prices are going to continue to go up.

The population growth uk is 0.6%, or c. 400k per annum, vs. New houses bring built c. 200k per annum.

So they can't (and won't) build houses fast enough. The only way can be done is a massive social housing build under a labour govt, but can't see that happening unless very big political will behind it.

It's tough for young people, but it's what it is. Have to rely on bank of Mum and dad if lucky. What might see is a pause in prices during the predicted recession then go up again.

That old argument of “demand exceeds supply” does not work at interest rates of 6% and average house prices at 12x average earnings. If UK house prices were already 40% lower than they are now, then it may have helped to reduce the fall.

And what is this UK population growth? It seems to be mainly illegal immigration brought to the UK beaches by people traffickers. If this is what you are relying on to keep UK house prices at 12x average earnings, and when interest rates are at 6%, then it is wishful thinking.

UK house prices are clearly headed for falls of up to 40%-50% in real terms over the next 4 years. The housing crash has already started in the US and in Australia. UK will not be far behind them.

[absolutezero]

So lets get this straight, you hold that house prices in Reeth will rise by 2.36% pa in perpetuity? Yes? This seems vanishingly unlikely! Or have you seen this forecast by some reputable organ somewhere?

Yeah. The BBC.

But no link, I notice.

Get off that hobby horse!

I was being sarcastic about the reputability of the Fake News BBC.

No it's difficult to be precise more than 5 years into the future.

It's difficult to be precise more than 30 seconds into the future.
As Yogi Berra allegedly said 'Making predictions is really difficult. Especially about the future.'

[absolutezero]

I agree, we are heading for 6-7% base rates. This could easily lead to house prices falling but I think by about one third at the most. Although base rates have been in the 1% territory for a few years, mortgage rates have not. They never fell below 3 to 4% unless I failed to notice, which banks used to rebuild their capital base.

Now banks are in a good position, I can imagine mortgage rates rising to say 7%, which might knock 30% off prices. Hardly a Ponzi scheme crash where everyone still invested loses everything.

I take it you don't own a house and are hoping to buy when the crash comes?

This tallies with my expectations. Around about 1/3 off over the next 5 years.

[absolutezero]

Not a Ponzi scheme, it is simply supply and demand.

Demand exceeds supply, so prices are going to continue to go up.

The population growth uk is 0.6%, or c. 400k per annum, vs. New houses bring built c. 200k per annum.

So they can't (and won't) build houses fast enough. The only way can be done is a massive social housing build under a labour govt, but can't see that happening unless very big political will behind it.

It's tough for young people, but it's what it is. Have to rely on bank of Mum and dad if lucky. What might see is a pause in prices during the predicted recession then go up again.

Your mistake is that the demand is hinged on the loose availability of credit and low interest rates. Not on the number of houses built.
One of those props is in the process of being kicked away and the other one will not be far behind.

I keep an eye on Rightmove. Lots of 20-30% reductions in asking price as things don't sell. Too much kite flying by people with high expectations.
I have also heard several anecdotals about people buying houses, agreeing a price and then the surveyor down values the house and the bank will not lend the amount they said they would.

There is a large amount of effluent coming down the pipe and some people haven't yet spotted it.

[richlist]

Sounds great. Big opportunity to pick up a few property bargains coming my way by the sound of it.

Many years ago when mortgage rates were 10% and pay rises were around the same, inflation worked in my favour.
When I took on a barely affordable mortgage within a couple of years pay rises had made it easily manageable. I know the Gov' don't want to return to that situation but I suspect it's what is coming.

[Tara]

Even the tabloids seem to be getting the UK house price crash message now.

https://www.express.co.uk/news/uk/16592 ... rket-crash

[CliffEdge]

Even the tabloids seem to be getting the UK house price crash message now.

https://www.express.co.uk/news/uk/16592 ... rket-crash

You'll learn, eventually, that everything in these newspapers and on TV is twaddle.
You are on a site, lemonfool, filled with very special people. Not ordinary people. People here with their vast knowledge and intelligence (I won't name names and I'm not one of them) can give you an edge over the majority of people in the UK.

Don't try to solve all the problems of the UK population, use the experts on here to solve your own problems.
Once you've done that you can donate to charities and volunteer like many of us do in the real world.

Moderator Message:
Edited to remove pejorative description of the majority of the people in the UK. --MDW1954

[Tara]

Even the tabloids seem to be getting the UK house price crash message now.

https://www.express.co.uk/news/uk/16592 ... rket-crash

You'll learn, eventually, that everything in these newspapers and on TV is twaddle.
You are on a site, lemonfool, filled with very special people. Not ordinary people. People here with their vast knowledge and intelligence (I won't name names and I'm not one of them) can give you an edge over the majority of people in the UK.

Don't try to solve all the problems of the UK population, use the experts on here to solve your own problems.
Once you've done that you can donate to charities and volunteer like many of us do in the real world.

Moderator Message:
Edited to remove pejorative description of the majority of the people in the UK. --MDW1954

I did not know that the people on here were “very special” people, and the readers of UK newspapers were only “ordinary” people.

How nice it must be for you to be so far above the ordinary UK plebs.

And no surprise that your obviously offensive and obnoxious post was deleted.

[CliffEdge]

Even the tabloids seem to be getting the UK house price crash message now.

https://www.express.co.uk/news/uk/16592 ... rket-crash

You'll learn, eventually, that everything in these newspapers and on TV is twaddle.
You are on a site, lemonfool, filled with very special people. Not ordinary people. People here with their vast knowledge and intelligence (I won't name names and I'm not one of them) can give you an edge over the majority of people in the UK.

Don't try to solve all the problems of the UK population, use the experts on here to solve your own problems.
Once you've done that you can donate to charities and volunteer like many of us do in the real world.

Moderator Message:
Edited to remove pejorative description of the majority of the people in the UK. --MDW1954

I did not know that the people on here were “very special” people, and the readers of UK newspapers were only “ordinary” people.

How nice it must be for you to be so far above the ordinary UK plebs.

And no surprise that your obviously offensive and obnoxious post was deleted.

I do not agree that it was an offensive and obnoxious post. It was blunt and forthright but truthful. I'm just one of the ignorant masses who has woken up. If you take the trouble to read my post properly you will see that I did not claim that everyone on here is special. I said that we are fortunate on here to have some experts who are very special and whose advice can be very helpful to individuals like myself who are willing to listen to facts that are not always easy to accept. Not slogans, not groupthink, not crazy ideology. Thinking is the hardest thing. Received wisdom is the enemy. Get yourself the oxygen first, only then you can help others.

[1nvest]

UK house prices are clearly headed for falls of up to 40%-50% in real terms over the next 4 years.

And the rest. Truss isn't going to help with this energy crisis anywhere near as how it was handled in the last one (1970's), when from a much lower base house prices declined a third (real). From a lower base (near 0% interest rates), two thirds declines in house prices would be 'good'. More likely -75%, maybe -80%.

Those that are voting for Truss from their £1M homes may come to regret their decision when they're struggling to sell it for £200K in order to fund just a years worth of late life care home costs, and look back with regret at how formerly that home might have sustained 12 years of such funding (or more typically left some for heirs given 4 years average 'stays'). After a year, nothing left, and dropped into the state funded limited 'choice' (demand vastly outpacing supply).

[absolutezero]

I do not agree that it was an offensive and obnoxious post. It was blunt and forthright but truthful. I'm just one of the ignorant masses who has woken up. If you take the trouble to read my post properly you will see that I did not claim that everyone on here is special. I said that we are fortunate on here to have some experts who are very special and whose advice can be very helpful to individuals like myself who are willing to listen to facts that are not always easy to accept. Not slogans, not groupthink, not crazy ideology. Thinking is the hardest thing. Received wisdom is the enemy. Get yourself the oxygen first, only then you can help others.

Received wisdom being:
- 'house prices only go up',
- 'you can't go wrong with pwoperdee',
- 'THEY won't let house prices fall',
- 'my house is my pension.'
- 'they might fall in [insert town here] but never where I live'

And the facts that are not easy to accept:
- 'Houses are too expensive'
- 'Younger generations are priced out and will be seeking to 'right this perceived wrong' as they get into positions of power'
- 'interest rates are rising'

Yes. It seems I agree with your post there.

[absolutezero]

UK house prices are clearly headed for falls of up to 40%-50% in real terms over the next 4 years.

And the rest. Truss isn't going to help with this energy crisis anywhere near as how it was handled in the last one (1970's), when from a much lower base house prices declined a third (real). From a lower base (near 0% interest rates), two thirds declines in house prices would be 'good'. More likely -75%, maybe -80%.

Those that are voting for Truss from their £1M homes may come to regret their decision when they're struggling to sell it for £200K in order to fund just a years worth of late life care home costs, and look back with regret at how formerly that home might have sustained 12 years of such funding (or more typically left some for heirs given 4 years average 'stays'). After a year, nothing left, and dropped into the state funded limited 'choice' (demand vastly outpacing supply).

Blimey.
Thought I was a house price bear!

I agree. Nasty stuff is working its way down the pipe and the vast majority (including, sadly, on here) don't see it coming and buy into the 'house prices can only go up' mantra. Bizarre.

[1nvest]

UK house prices are clearly headed for falls of up to 40%-50% in real terms over the next 4 years.

And the rest. Truss isn't going to help with this energy crisis anywhere near as how it was handled in the last one (1970's), when from a much lower base house prices declined a third (real). From a lower base (near 0% interest rates), two thirds declines in house prices would be 'good'. More likely -75%, maybe -80%.

Those that are voting for Truss from their £1M homes may come to regret their decision when they're struggling to sell it for £200K in order to fund just a years worth of late life care home costs, and look back with regret at how formerly that home might have sustained 12 years of such funding (or more typically left some for heirs given 4 years average 'stays'). After a year, nothing left, and dropped into the state funded limited 'choice' (demand vastly outpacing supply).

Blimey.
Thought I was a house price bear!

I agree. Nasty stuff is working its way down the pipe and the vast majority (including, sadly, on here) don't see it coming and buy into the 'house prices can only go up' mantra. Bizarre.

Rising interest rates along could wipe 50% off. Factor in high inflation and a 1970's type 30% drop on top and -66% down is perhaps more likely than 75% or 80%. However I think a clueless Truss PM could push it to those more extremes, at least until Labour got back into power at the next GE to tidy up the economic wreck that the Tories had left them.

[absolutezero]

at least until Labour got back into power at the next GE to tidy up the economic wreck that the Tories had left them.

You're yanking my chain with this bit, right?
You think Labour would be better?

[airbus330]

Unfortunately , its all to easy to forget that many, myself included, got conned into voting for Tony Blair and "New" Labour in 1997, which was a relief after the awfulness of the final Major years. But it didn't take long for the spending floodgates to open and eventually an empty excheaquer. If Starmer gets in, the same will happen, only much more quickly. The Conservative Party has lost its collective mind and in 2 yrs time I'll be making plans to mitigate for 4 yrs of Labour. FWIW, I don't think any of this will have much effect on housing prices, except in the short term. Too many people vs not enough property. That ratio won't change in what remains of my lifetime, barring a world war.

[CliffEdge]

Unfortunately , its all to easy to forget that many, myself included, got conned into voting for Tony Blair and "New" Labour in 1997, which was a relief after the awfulness of the final Major years. But it didn't take long for the spending floodgates to open and eventually an empty excheaquer. If Starmer gets in, the same will happen, only much more quickly. The Conservative Party has lost its collective mind and in 2 yrs time I'll be making plans to mitigate for 4 yrs of Labour. FWIW, I don't think any of this will have much effect on housing prices, except in the short term. Too many people vs not enough property. That ratio won't change in what remains of my lifetime, barring a world war.

Or a deadly epidemic

[Mike4]

UK house prices are clearly headed for falls of up to 40%-50% in real terms over the next 4 years.

And the rest. Truss isn't going to help with this energy crisis anywhere near as how it was handled in the last one (1970's), when from a much lower base house prices declined a third (real). From a lower base (near 0% interest rates), two thirds declines in house prices would be 'good'. More likely -75%, maybe -80%.

Those that are voting for Truss from their £1M homes may come to regret their decision when they're struggling to sell it for £200K in order to fund just a years worth of late life care home costs, and look back with regret at how formerly that home might have sustained 12 years of such funding (or more typically left some for heirs given 4 years average 'stays'). After a year, nothing left, and dropped into the state funded limited 'choice' (demand vastly outpacing supply).

Blimey.
Thought I was a house price bear!

I agree. Nasty stuff is working its way down the pipe and the vast majority (including, sadly, on here) don't see it coming and buy into the 'house prices can only go up' mantra. Bizarre.

Well you must be reading a different TLF to me then. In fact I can't think of a single poster on here who expresses the view 'house prices can only go up". Can you cite someone perhaps?

[airbus330]

UK house prices are clearly headed for falls of up to 40%-50% in real terms over the next 4 years.

And the rest. Truss isn't going to help with this energy crisis anywhere near as how it was handled in the last one (1970's), when from a much lower base house prices declined a third (real). From a lower base (near 0% interest rates), two thirds declines in house prices would be 'good'. More likely -75%, maybe -80%.

Those that are voting for Truss from their £1M homes may come to regret their decision when they're struggling to sell it for £200K in order to fund just a years worth of late life care home costs, and look back with regret at how formerly that home might have sustained 12 years of such funding (or more typically left some for heirs given 4 years average 'stays'). After a year, nothing left, and dropped into the state funded limited 'choice' (demand vastly outpacing supply).

Blimey.
Thought I was a house price bear!

I agree. Nasty stuff is working its way down the pipe and the vast majority (including, sadly, on here) don't see it coming and buy into the 'house prices can only go up' mantra. Bizarre.

Well you must be reading a different TLF to me then. In fact I can't think of a single poster on here who expresses the view 'house prices can only go up". Can you cite someone perhaps?

I think that house prices can only go up.
But in a nuanced way. Over the next year, I think they may fall somewhat or remain largely flat, but if things play out as they did after the 2008 Banking Crisis, the return to growth will return. High Interest rates, probably transitory, but even if they persist won't stop the train. 15% interest rates only temporarily damped the house market in the early 90's. Supply and Demand trumps economic sense. The UK has an enduring psychological attachment to owning a home (land). You only need to attend a large urban property auction to see that people who have come to the UK over the last 60 years have adopted this love of property ownership. A tangible asset, steady returns (even in the face of regulatory clampdowns) and something which can be passed inter-generationally. Society has also changed, in that there are vastly more people living as singletons or child free units. Even technological changes such as AirBNB adds to pressures on available stock by taking them from the market for homes into the that of holiday accommodation. Overriding all of this is the deep reluctance of all levels governments to let planning explode in a way that will have any effect on the demand which is stoked by a rapidly growing population. I don't think that it is possible to re-run the long depression of house prices that we had in the 1970's. In that decade we still had a largely stable population that hadn't been invigorated by Maggie Thatcher's home ownership revolution, an ample supply of homes (although many were in poor condition, but therefore cheap) and we still had land (there were still derelict buildings and bombsites from WW2 in the London area where I grew up) which could be cheaply developed. Very little of that exists now, even in the post industrial northern cities. So, apart from interest rates temporarily flattening the market, I can't see any logical long term argument that says house prices will fall.

[scrumpyjack]

Whilst some 'correction' in house prices is very likely, the commentators all talk as if mortgage affordability is the only factor. But since 2015 more people have owned their property with NO mortgage at all than have a mortgage. That proportion is likely to have increased a lot more since then. Where there is a mortgage the average debt is £138,000 or less than 60% of the average property value.

[absolutezero]

Whilst some 'correction' in house prices is very likely, the commentators all talk as if mortgage affordability is the only factor. But since 2015 more people have owned their property with NO mortgage at all than have a mortgage. That proportion is likely to have increased a lot more since then. Where there is a mortgage the average debt is £138,000 or less than 60% of the average property value.

First thing to note is that 68% of purchases involve a mortgage and house prices are set at the margin - i.e. via the comparatively small number of houses that are bought and sold.
If bank lending tightens up (due to higher interest rates i.e. "you can't afford to borrow this much any more so here is our reduced offer of what we will lend you" the the margin prices will decrease. Which then has a knock on to notional value of the rest.

Second. Old mortgages don't matter too much. It's the new ones that matter as they are the ones that set prices - see the margin effect above.

Third. If the lender will only lend, say, 70% of the value, then in the event of negative equity, it's your 30% that disappears before any of the bank's 70%.