The Lemon Fool

We have been this way before, about 1974. That time house prices rose by about 100% in a couple of years, then paused until the market caught up with them. We bought in 1970, sold in 1978 for 3 times what we paid, and the house which we bought then has probably increased in value about 30 times.

Interest rates were at somewhat higher levels back then, of course.

TJH

Dod101 wrote:

Mike4 wrote:

Dod101 wrote:
Why do falling prices equal rising rents, (except on yield of course) Falling property prices ought to mean more people can afford to buy.

I don't have an explanation of why it happens. Its something I've noticed over 25 years investing in property. When the property sales smarket talls or goes into reverse, rents tend to rise. And vice versa. During the meteoric rise in prices starting in the late 90s, rents around here were broadly static for a decade.

You could well be right about the reasons.


Edit to add a missing word!

I am not trying to be clever. What you say is interesting but when prices fall it ought to produce an increased demand The housing market is not a 'normal' market, though. There is a FOMO effect I think. It would probably be helpful for Government of somebody to advise buyers of how markets actually work. I remember, when I bought my last house, a big step up valuewise from my previous one, I took advantage of a slump in the demand for North Sea oil and was happy to relieve a younger couple of their rather expensive house when they were forced sellers close to one Christmas, he having lost his job. I discovered afterwards that he of course had a very big mortgage and could not service it. I had access to cash and was thus effectively a cash buyer. That is how markets are supposed to work.

Dod

I think when prices are falling, people get wary about buying. Why pay £250k now for a type of house you judge likely to be available for £225k in six months' time?

Same happens with equities, doesn't it? When a bear market begins, why is it not stopped dead in an instant by people seeing cheaper prices and piling in? Confidence, I'd suggest. Wait and see how much lower it goes.... is this not the way the regular punter thinks?

Tara wrote:

CliffEdge wrote:Why would anyone sell their house when property prices have fallen? They won't, so property prices won't fall. Price rises might not keep up with the overall cost of living though, I agree with that.

This does not make any sense. It is like saying “ Why would anyone sell Bitcoin when Bitcoin has fallen by 50%? They won’t, so Bitcoin won’t fall!”. Quite absurd.

I see what you're saying, I think. But you're being too literal. What happens is the market dies. Most people do not put their properties up for sale. Nominal house prices may fall slightly but there is no bargain basement surplus to be snapped up. Sorry mate.
That only happens when there's a sub prime lending crisis, see the US a few years ago.

Tara wrote:

richlist wrote:There is a group of people who continuously predict property prices are far to high and will collapse. The group comprises of people who don't own property but who relish the idea of a complete collapse in values. I've come across them many times in the past. I can only assume their enthusiasm is driven by jealousy or a belief that it will provide them with an opportunity to buy.

And of course the landlords who make money out of property are all blameless people and they have no other motive.

The main motivation of landlords is of course making money at the expense of those who are less fortunate, and that is the reason why so many of them are called “greedy” landlords.

Oh dear. And when all this mindless crap results in many landlords selling up, where are those less fortunate renters going to live?

Tara wrote:

richlist wrote:There is a group of people who continuously predict property prices are far to high and will collapse. The group comprises of people who don't own property but who relish the idea of a complete collapse in values. I've come across them many times in the past. I can only assume their enthusiasm is driven by jealousy or a belief that it will provide them with an opportunity to buy.

And of course the landlords who make money out of property are all blameless people and they have no other motive.

The main motivation of landlords is of course making money at the expense of those who are less fortunate, and that is the reason why so many of them are called “greedy” landlords.

Landlords, in my view, are the most likely candidate for being taxed and regulated to death by an incoming Labour government. Public enemy number one. Hated by everyone. Especially the young Labour voter. Easy and popular target.
Not a sector I would want to be in. The good days have gone.

Mike4 wrote:

Dod101 wrote:

Mike4 wrote:

Dod101 wrote:
Why do falling prices equal rising rents, (except on yield of course) Falling property prices ought to mean more people can afford to buy.

I don't have an explanation of why it happens. Its something I've noticed over 25 years investing in property. When the property sales smarket talls or goes into reverse, rents tend to rise. And vice versa. During the meteoric rise in prices starting in the late 90s, rents around here were broadly static for a decade.

You could well be right about the reasons.


Edit to add a missing word!

I am not trying to be clever. What you say is interesting but when prices fall it ought to produce an increased demand The housing market is not a 'normal' market, though. There is a FOMO effect I think. It would probably be helpful for Government of somebody to advise buyers of how markets actually work. I remember, when I bought my last house, a big step up valuewise from my previous one, I took advantage of a slump in the demand for North Sea oil and was happy to relieve a younger couple of their rather expensive house when they were forced sellers close to one Christmas, he having lost his job. I discovered afterwards that he of course had a very big mortgage and could not service it. I had access to cash and was thus effectively a cash buyer. That is how markets are supposed to work.

Dod

I think when prices are falling, people get wary about buying. Why pay £250k now for a type of house you judge likely to be available for £225k in six months' time?

Same happens with equities, doesn't it? When a bear market begins, why is it not stopped dead in an instant by people seeing cheaper prices and piling in? Confidence, I'd suggest. Wait and see how much lower it goes.... is this not the way the regular punter thinks?

Yes. So falling prices have a momentum effect.
Prices are already falling, by the way... See the Bloomberg article.

absolutezero wrote:

Mike4 wrote:

Dod101 wrote:

Mike4 wrote:

Dod101 wrote:
Why do falling prices equal rising rents, (except on yield of course) Falling property prices ought to mean more people can afford to buy.

I don't have an explanation of why it happens. Its something I've noticed over 25 years investing in property. When the property sales smarket talls or goes into reverse, rents tend to rise. And vice versa. During the meteoric rise in prices starting in the late 90s, rents around here were broadly static for a decade.

You could well be right about the reasons.


Edit to add a missing word!

I am not trying to be clever. What you say is interesting but when prices fall it ought to produce an increased demand The housing market is not a 'normal' market, though. There is a FOMO effect I think. It would probably be helpful for Government of somebody to advise buyers of how markets actually work. I remember, when I bought my last house, a big step up valuewise from my previous one, I took advantage of a slump in the demand for North Sea oil and was happy to relieve a younger couple of their rather expensive house when they were forced sellers close to one Christmas, he having lost his job. I discovered afterwards that he of course had a very big mortgage and could not service it. I had access to cash and was thus effectively a cash buyer. That is how markets are supposed to work.

Dod

I think when prices are falling, people get wary about buying. Why pay £250k now for a type of house you judge likely to be available for £225k in six months' time?

Same happens with equities, doesn't it? When a bear market begins, why is it not stopped dead in an instant by people seeing cheaper prices and piling in? Confidence, I'd suggest. Wait and see how much lower it goes.... is this not the way the regular punter thinks?

Yes. So falling prices have a momentum effect.
Prices are already falling, by the way... See the Bloomberg article.

Quite. So this loops back to my original point, that rents are rising. And rising rents tend to go hand-in-hand with a stagnating sales market, the point that Dod questioned!

absolutezero wrote:

Mike4 wrote:

Dod101 wrote:

Mike4 wrote:

Dod101 wrote:
Why do falling prices equal rising rents, (except on yield of course) Falling property prices ought to mean more people can afford to buy.

I don't have an explanation of why it happens. Its something I've noticed over 25 years investing in property. When the property sales smarket talls or goes into reverse, rents tend to rise. And vice versa. During the meteoric rise in prices starting in the late 90s, rents around here were broadly static for a decade.

You could well be right about the reasons.


Edit to add a missing word!

I am not trying to be clever. What you say is interesting but when prices fall it ought to produce an increased demand The housing market is not a 'normal' market, though. There is a FOMO effect I think. It would probably be helpful for Government of somebody to advise buyers of how markets actually work. I remember, when I bought my last house, a big step up valuewise from my previous one, I took advantage of a slump in the demand for North Sea oil and was happy to relieve a younger couple of their rather expensive house when they were forced sellers close to one Christmas, he having lost his job. I discovered afterwards that he of course had a very big mortgage and could not service it. I had access to cash and was thus effectively a cash buyer. That is how markets are supposed to work.

Dod

I think when prices are falling, people get wary about buying. Why pay £250k now for a type of house you judge likely to be available for £225k in six months' time?

Same happens with equities, doesn't it? When a bear market begins, why is it not stopped dead in an instant by people seeing cheaper prices and piling in? Confidence, I'd suggest. Wait and see how much lower it goes.... is this not the way the regular punter thinks?

Yes. So falling prices have a momentum effect.
Prices are already falling, by the way... See the Bloomberg article.

A lot of the naysayers are going to be disappointed.

Mike4 wrote:

absolutezero wrote:

Mike4 wrote:

Dod101 wrote:

Mike4 wrote:

I don't have an explanation of why it happens. Its something I've noticed over 25 years investing in property. When the property sales smarket talls or goes into reverse, rents tend to rise. And vice versa. During the meteoric rise in prices starting in the late 90s, rents around here were broadly static for a decade.

You could well be right about the reasons.


Edit to add a missing word!

I am not trying to be clever. What you say is interesting but when prices fall it ought to produce an increased demand The housing market is not a 'normal' market, though. There is a FOMO effect I think. It would probably be helpful for Government of somebody to advise buyers of how markets actually work. I remember, when I bought my last house, a big step up valuewise from my previous one, I took advantage of a slump in the demand for North Sea oil and was happy to relieve a younger couple of their rather expensive house when they were forced sellers close to one Christmas, he having lost his job. I discovered afterwards that he of course had a very big mortgage and could not service it. I had access to cash and was thus effectively a cash buyer. That is how markets are supposed to work.

Dod

I think when prices are falling, people get wary about buying. Why pay £250k now for a type of house you judge likely to be available for £225k in six months' time?

Same happens with equities, doesn't it? When a bear market begins, why is it not stopped dead in an instant by people seeing cheaper prices and piling in? Confidence, I'd suggest. Wait and see how much lower it goes.... is this not the way the regular punter thinks?

Yes. So falling prices have a momentum effect.
Prices are already falling, by the way... See the Bloomberg article.

Quite. So this loops back to my original point, that rents are rising. And rising rents tend to go hand-in-hand with a stagnating sales market, the point that Dod questioned!

No I was not questioning that point. You have the evidence. I simply found it interesting and wondered why.

Dod

Dod101 wrote:

Tara wrote:

richlist wrote:There is a group of people who continuously predict property prices are far to high and will collapse. The group comprises of people who don't own property but who relish the idea of a complete collapse in values. I've come across them many times in the past. I can only assume their enthusiasm is driven by jealousy or a belief that it will provide them with an opportunity to buy.

And of course the landlords who make money out of property are all blameless people and they have no other motive.

The main motivation of landlords is of course making money at the expense of those who are less fortunate, and that is the reason why so many of them are called “greedy” landlords.

Why are you implying that people who rent are 'less fortunate' ? That is one of the myths in this country, that people who rent cannot afford to buy otherwise they would. This is a mindset only as far as I know shared in this country. Landlords are not 'making money at the expense of those who are less fortunate'; they are fulfilling a need and a desire. This is how a capitalist society works.

Dod

Because it is a fact. Those who cannot afford the average £30,000 cash deposit for the average UK house (£300,000 x 10%) tend to be “less fortunate” than those who have £30,000 in available cash or who can receive gifts from The Bank of Mum and Dad.

Dod101 wrote:

Mike4 wrote:

Dod101 wrote:
Why do falling prices equal rising rents, (except on yield of course) Falling property prices ought to mean more people can afford to buy.

I don't have an explanation of why it happens. Its something I've noticed over 25 years investing in property. When the property sales smarket talls or goes into reverse, rents tend to rise. And vice versa. During the meteoric rise in prices starting in the late 90s, rents around here were broadly static for a decade.

You could well be right about the reasons.


Edit to add a missing word!

I am not trying to be clever. What you say is interesting but when prices fall it ought to produce an increased demand The housing market is not a 'normal' market, though. There is a FOMO effect I think. It would probably be helpful for Government of somebody to advise buyers of how markets actually work. I remember, when I bought my last house, a big step up valuewise from my previous one, I took advantage of a slump in the demand for North Sea oil and was happy to relieve a younger couple of their rather expensive house when they were forced sellers close to one Christmas, he having lost his job. I discovered afterwards that he of course had a very big mortgage and could not service it. I had access to cash and was thus effectively a cash buyer. That is how markets are supposed to work.

Dod

Well I’m alright Jack. It is nice that you were able to profit so well from the other man’s misfortune and unemployment.

CliffEdge wrote:

Tara wrote:

richlist wrote:There is a group of people who continuously predict property prices are far to high and will collapse. The group comprises of people who don't own property but who relish the idea of a complete collapse in values. I've come across them many times in the past. I can only assume their enthusiasm is driven by jealousy or a belief that it will provide them with an opportunity to buy.

And of course the landlords who make money out of property are all blameless people and they have no other motive.

The main motivation of landlords is of course making money at the expense of those who are less fortunate, and that is the reason why so many of them are called “greedy” landlords.

Oh dear. And when all this mindless crap results in many landlords selling up, where are those less fortunate renters going to live?

On aggregate in the same places as now. House being sold to someone else, in general, are still available for living in. Few landlords (or owners) when deciding to exit the market destroy a home. It remains in the market for people to rent or buy and inhabit.

dealtn wrote:

CliffEdge wrote:

Tara wrote:

richlist wrote:There is a group of people who continuously predict property prices are far to high and will collapse. The group comprises of people who don't own property but who relish the idea of a complete collapse in values. I've come across them many times in the past. I can only assume their enthusiasm is driven by jealousy or a belief that it will provide them with an opportunity to buy.

And of course the landlords who make money out of property are all blameless people and they have no other motive.

The main motivation of landlords is of course making money at the expense of those who are less fortunate, and that is the reason why so many of them are called “greedy” landlords.

Oh dear. And when all this mindless crap results in many landlords selling up, where are those less fortunate renters going to live?

On aggregate in the same places as now. House being sold to someone else, in general, are still available for living in. Few landlords (or owners) when deciding to exit the market destroy a home. It remains in the market for people to rent or buy and inhabit.

Well, all of the above having been said and apart from the ethics, is the consensus that property prices will go up or down ?

I think things are going to get quite sticky in the UK. There is a strong possibility that many companies, faced with increased wage demands and vastly increased energy bills are simply going to padlock the doors and call it a day. Then is is a case of what do folk do to pay their mortgages? Some will have locked in to low rates for the next year or two but have not factored in a loss of income from one (or both) wage earners. Thus, there is a chance of a repeat of the 90s when keys were handed back to the estate agent. It's happened before and can happen again.

monabri wrote:I think things are going to get quite sticky in the UK. There is a strong possibility that many companies, faced with increased wage demands and vastly increased energy bills are simply going to padlock the doors and call it a day. Then is is a case of what do folk do to pay their mortgages? Some will have locked in to low rates for the next year or two but have not factored in a loss of income from one (or both) wage earners. Thus, there is a chance of a repeat of the 90s when keys were handed back to the estate agent. It's happened before and can happen again.

That is a very real risk but would only drop house prices by around 11.34%, hardly a crash. But the resulting lack of rental property and increase in rents will result in much homelessness.

scotview wrote:

dealtn wrote:

CliffEdge wrote:

Tara wrote:

richlist wrote:There is a group of people who continuously predict property prices are far to high and will collapse. The group comprises of people who don't own property but who relish the idea of a complete collapse in values. I've come across them many times in the past. I can only assume their enthusiasm is driven by jealousy or a belief that it will provide them with an opportunity to buy.

And of course the landlords who make money out of property are all blameless people and they have no other motive.

The main motivation of landlords is of course making money at the expense of those who are less fortunate, and that is the reason why so many of them are called “greedy” landlords.

Oh dear. And when all this mindless crap results in many landlords selling up, where are those less fortunate renters going to live?

On aggregate in the same places as now. House being sold to someone else, in general, are still available for living in. Few landlords (or owners) when deciding to exit the market destroy a home. It remains in the market for people to rent or buy and inhabit.

Well, all of the above having been said and apart from the ethics, is the consensus that property prices will go up or down ?

Property prices go up & down all the time. So on that basis you probably aren't asking the right question. Given the dire economic situation I think it's unlikely that we will see any big increases. But I don't believe we are going to see any big fall in prices either. If the cost of living issues continue for 3-5 years as predicted we are in uncharted territory.
Repossessions ? Yes, very likely. We had a lot of those around 2000, I bought a few direct from the banks then, it could be a good time to buy. A recovery is eventually more likely than not.

There are lots of considerations when buying property that are of equal importance to the price paid......geo' location, area, type, features, facilities, condition, tenure, potential, ground rent, lease length etc etc. Buying the right property for the right price is still the goal for most.

CliffEdge wrote:That is a very real risk but would only drop house prices by around 11.34%, hardly a crash.

I'd be fascinated to see your workings to arrive at this astonishing figure, to two decimal places of a percent!

But the resulting lack of rental property and increase in rents will result in much homelessness.

The point has been made elsewhere in the thread, but I feel the need to point out that the houses will remain in existence, in the roads and streets. One way or another, people will still live in them. Even if they get boarded up by the mortgage companies in repossession, squatters will move in I predict, legally or not.

The public at large simply won't stand for large numbers of houses being kept empty by lenders. Besides, why would lenders in repossession not just inject them straight back into the market via the auction rooms?

scotview wrote:

dealtn wrote:

CliffEdge wrote:

Tara wrote:

richlist wrote:There is a group of people who continuously predict property prices are far to high and will collapse. The group comprises of people who don't own property but who relish the idea of a complete collapse in values. I've come across them many times in the past. I can only assume their enthusiasm is driven by jealousy or a belief that it will provide them with an opportunity to buy.

And of course the landlords who make money out of property are all blameless people and they have no other motive.

The main motivation of landlords is of course making money at the expense of those who are less fortunate, and that is the reason why so many of them are called “greedy” landlords.

Oh dear. And when all this mindless crap results in many landlords selling up, where are those less fortunate renters going to live?

On aggregate in the same places as now. House being sold to someone else, in general, are still available for living in. Few landlords (or owners) when deciding to exit the market destroy a home. It remains in the market for people to rent or buy and inhabit.

Well, all of the above having been said and apart from the ethics, is the consensus that property prices will go up or down ?

I would say that UK house prices are quite likely to fall by about 5% in nominal terms for each of the next 4 years. But during that time UK inflation is likely to total about 20%, and it is already at 10% in the first year.

So nominal falls of about 20% in the next 4 years, and 20% inflation in the next 4 years, will give UK house price falls of about 40% in real terms over the next 4 years.

And this 40% fall in real terms is a fairly optimistic scenario. The falls could be much faster and much worse, depending on how bad the economic situation will be in the next few years.

Tara wrote:

Dod101 wrote:

Tara wrote:

richlist wrote:There is a group of people who continuously predict property prices are far to high and will collapse. The group comprises of people who don't own property but who relish the idea of a complete collapse in values. I've come across them many times in the past. I can only assume their enthusiasm is driven by jealousy or a belief that it will provide them with an opportunity to buy.

And of course the landlords who make money out of property are all blameless people and they have no other motive.

The main motivation of landlords is of course making money at the expense of those who are less fortunate, and that is the reason why so many of them are called “greedy” landlords.

Why are you implying that people who rent are 'less fortunate' ? That is one of the myths in this country, that people who rent cannot afford to buy otherwise they would. This is a mindset only as far as I know shared in this country. Landlords are not 'making money at the expense of those who are less fortunate'; they are fulfilling a need and a desire. This is how a capitalist society works.

Dod

Because it is a fact. Those who cannot afford the average £30,000 cash deposit for the average UK house (£300,000 x 10%) tend to be “less fortunate” than those who have £30,000 in available cash or who can receive gifts from The Bank of Mum and Dad.

No one could argue with that but that is not the point I am making. Everyone assumes that those who rent cannot afford to buy or they would buy. Why make that assumption in the first place?

Dod

Mike4 wrote:

CliffEdge wrote:But the resulting lack of rental property and increase in rents will result in much homelessness.

The point has been made elsewhere in the thread, but I feel the need to point out that the houses will remain in existence, in the roads and streets. One way or another, people will still live in them.

But what could happen is that the landlord wants out of doing long-term rentals, but doesn't want to sell. That happened with me in 2003. The decision not to sell worked out as we had 4 more years of rip-roaring house price appreciation. So what I did was effectively change the use of the housing units.

From that point on I only did short-term rentals. This was before Airbnb, but I would find people who wanted a place for, say 3 to 6 months. So yes, people were still living in them. But the result was that there were fewer homes available for long-term rental but no increase in the homes available for sale.

You see this a lot in desirable vacation areas, where the locals can't find affordable housing because so much of the housing stock is holiday lets or second homes.

So if landlords are deterred too much there could be a marked decrease in long-term rentals and an increase in short-term rentals and other changes of use.

I also let one flat commercially. A woman who imports high-end fashion from Italy wanted a home setting to store and display her clothing lines, and where clients could visit. She paid a market rent but nobody stayed or lived there.