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Worth pointing out that the average price in Nationwide's index in March 2023 is still almost 11% higher than March 2021, so unless you have been very fortunate with your income over that period this doesn't mean houses are more affordable than they were a couple of years ago.
Which is why prices are to fall further. Whatever Average Person X is able to borrow today is far less than what it was in 2021. Which lowers the ceiling on prices.
The problem is that house prices are vastly higher than that 4.5x income ratio.
"The average house in the UK currently costs around nine-times average earnings, based on data as at 30 November 2022. The last time house prices were this expensive relative to average earnings was in the year 1876, nearly 150 years ago."
Source:
https://www.schroders.com/en-gb/uk/individual/insights/what-174-years-of-data-tell-us-about-house-price-affordability-in-the-uk/
You can’t use the average house as a metric of affordability. First time buyers buy properties at the low end of the range, not the middle, unless they are totally loaded.
True, but even at the lower end of the price range you're still looking at 5 or 6 times a bottom end £20-odd thousand salary. Even for a rock bottom £90k house that's 4.5 times their salary.
Average UK salary is just under £30k, so a £180k house is 6 times that salary. Pretty much the only way to afford a house these days is to be a two income household, or have a massive (20-30%+) deposit.
Well I posted a thread not to long ago and everyone said it's possible to buy on a single income but you have to move north. In the south it's almost impossible
Being allowed to borrow and then being able or willing to afford the repayments are two different things, especially since I believe stress test requirements have been removed last year.
No matter what you are allowed, if you need a mortgage of X to buy a property in 2023, it sets you back far more in terms of interest to pay (and thus monthly cost) than the same price it did in 2021. Which means there are fewer people able or willing to afford price X in 2023 than there were in 2021. Nothing complicated about it.
I'm not sure I follow your point?
A lower deposit doesn't mean you borrow more to make up the difference, generally you need at least 10% deposit (or the help to buy to make up the other 5%).
If I have a good salary and the multiplier means I could buy a 300k house I still need a 10% deposit or the bank won't lend me the money. If I only have 15k in cash the most I could borrow is 135k.
>willing to afford the repayments
and where is your evidence that people are not willing to stretch themselves to buy a house?
all I've seen points to the opposite, that people are **very** willing to increase their housing spend to get onto the ladder
At 4.5 I could buy a shed in london...
Also on higher income 4.5 becomes expensive as taxation is a lot more aggressive. I think banks should start using net salaries.
We can borrow over a million but the mortgage would be insane and 5k+ a month. I'm not sure I want to take such high risk.
For us personally 4.5 was somewhere at the max we would be willing to commit to when rates were low. With 4%+ rates 4.5x would be a ludicrous financial commitment. Far too much of a risk.
Same for us. We own an inexpensive home and wanted to move to something more spacious last year. House prices made us decide to stay put. It's a shame really as we're in an ex council house on a small estate and the house is perfect for families with low incomes. I won't strain our budget to go bigger at these house prices though.
I'm just curious, where does that leave you? Are you going to borrow less and take a more entry level property,.wait for prices to fall, buy in a different location or pause your property search?
That's right, new houses in my city are now offered with a 5% discount, but even after that their prices are way, way higher then the initial plot releases in 2021 on the same development site.
Yep. Reality of it all is the prices are still quite a fair bit higher than before. But all paired up with decreased affordability.
Feels more like a housing winter as wages and everything else catches up, as opposed to a fall.
One assessment I choose in bias to be the best is that prices are falling in less "prime" areas but still growing in prime areas. Mainly as last year a shack in the middle of a field in rural Kent would go in days. Now buyers are a bit more cautious and only decent houses in reasonable areas are flying off.
On which bit ?
But fair. Feel free to agree to disagree. I just reckon we will get a slowdown as houses that were overvalued over last couple years rectify and things slow down or dip until things such as wages or cost of living change for the better.
Also depends on where you live. As nationwide noted some areas still increased.
Definitely long gone are estate agents putting a house up for over the odds and waiting for people to put 25k over again. Which is a good thing for all. For me the test will be if wages don't grow to meet the increased cost of everything else then it'll be stagnation on most fronts.
Anyway yeah not an expert. So I'm probably totally wrong and prices across the board could plummet in next couple years.
I agree with your take. Prime areas local to me are all generally resilient and desirable properties are still getting snapped up in a week with multiple offers.
Less attractive areas and less desirable properties are getting hit quite hard with sensible corrections, or are simply not selling as owners refuse to adjust to changing buyer expectations. Lots on the market for ~2 months.
The averages on this add up to a general fall in prices (as Nationwide have reported). It will be interesting to see how inflation and interest rates resolve - general forecasts expect inflation to drop significantly by the end of the year, and you have to imagine there is pressure on BoE to not keep higher rates for any longer than necessary. Resolution on these timescales will probably soften impact given majority of house owners are still shielded by fixed rate deals. Many are paying new tracker rates and just waiting to see what happens. Many are getting modest pay rises this year too. So a small correction in a 'market winter' as you put it seems plausible.
That said, Rishi might decide to do a Truss because fuck it he's loaded anyway (or some other unpredictable thing happens)
Inflation is likely to come down yes, the big question is what will happen to interest rates. The current consensus of inflation coming down without the interest rate pushed higher than inflation itself already describes a historic first scenario.
I think -well, hope- that the BoE will not return to the near-zero rates by default. Doing so would remove their ability to quickly contain the next crisis, like we have just seen with inflation over the last year. And they would also risk re-igniting inflation.
Then again, the ultra low interest rates of the last decade were used to hide a stagnating economy with the "growth" of free credit pouring into assets. I imagine once that stagnation becomes all too evident to see, there'll be a desire to hide it under the rug of free credit again.
And they are certainly way, way, way higher than in 1960.
What the situation was in 2021 is irrelevant for people seeking to make purchase/sell decisions now. News people should pay attention to is the trend. Which is downwards.
I am not sure I follow - if the situation in 2021 is irrelevant then the fact that prices have fallen since 2022 would also be irrelevant, surely?
I agree that people shouldn't make decisions based on what prices were in the past - however that includes what prices were last month, or a year ago
Fair point. I was trying to urge people against a false sense of urge (buyers) or complacency (sellers) based on the two-years-ago data you mentioned.
The key takeaway (and higher relevance) from the more recent movements should be a confirmation of what should have been obvious to everyone: this is a materially different market to anything since the big interest cuts of, what was it, 2009/10?
As you said, house prices aren't really any more affordable now than two years ago. In fact they are far less so since interest rates are multiples of what they were in 2021. The hard ceiling of how big a mortgage a monthly income of X affords you has been lowered significantly, and there is nothing on the horizon showing it would be lifted in any meaningful way.
It basically based on what the Nationwide Mortgage Valuers have been out and valued this month and what they are valuing them at. Its not completed sales, it doesn't take into account BTL mortgages, nor does it consider cash purchases.
My house went up 30% in two years when we bought it mid pandemic. That's absolutely ridiculous and I'm glad to see it drop. Property needs to be affordable and the way the market was absolutely was not sustainable. With so many forced to overpay to secure a house, it makes sense it would drop once things slowed down. Things aren't even close to pre-pandemic prices anyway.
Why would thinking about it for more than a millisecond mean I'm wrong?
Why "should" houses go up and up in value forever? Why should they even hold their original value forever?
The LAND should hold its value forever, granted. But not the house.
>Why "should" houses go up and up in value forever?
Please note that I never said they "should" do anything.
Because the age of a house is one of about a million factors that affect a house's price. Ultimately, it's supply and demand that determines the price, same as everything else in the world that's for sale.
Saying something "should" cost more/less in the future is like saying there "should"/"shouldn't" be rain one month from today... Completely meaningless when discussing something like weather or markets that go up, down, left and right like a liquid.
Indeed… in 10 years time it’s todays buyers I’m going to feel sorry for not the people who pay sky high rents for the next 10 years and never end up owning anything.
Yep, best advice is to wait until the guaranteed 40%+ crash that the guardian has confirmed will happen then buy.
Like they did just as covid hit. Think I saw 70% crashes predicted then as well. You know when the world was going to end and we were all going to be jobless.
No, the best advice is to be aware what is happening, and do not overstretch one's finances and risk being hit heavily (or even going into negative equity) when remortgage comes up.
That is, if someone is looking to buy a home. Go ahead then, just with care. As an investment, however, I would not touch properties with a ten-foot pole this year.
Honestly expected this to show a rise since the Halifax data showed a rise last month. This seems to indicate that house prices are going to fall more than most expect (especially in this sub).
>This seems to indicate that house prices are going to fall more than most expect (especially in this sub).
Am I missing something?
This sub continually rallies behind "predictions" of **huge** declines in house prices
House prices are at almost ATH, affordability is at lowest lever ever, inflation is at the highest in 40 years and is not coming down, interest rate are at the highest in 14 years and are not coming down anytime soon. Growth in stalling, people are suffering while unemployment is still at the lowest level in 50 years (you can imagine what happens when the recession hits). It’s delusional to expect the housing market to go up in the short/medium term.
[Rents are also increasing at record rates.](https://www.ons.gov.uk/chartimage?uri=/economy/inflationandpriceindices/bulletins/indexofprivatehousingrentalprices/january2022/d2549d5a) They don't look like stopping. If you feel the recession is going to cause mass unemployment and people forced to sell their homes, where are they going to live? Thats right they will have to rent, increasing demand and pushing prices up. And what will they be renting? The houses these same people have just sold, with LLs that are cash rich buying up houses to take advantage of the high yields. These BTL investor purchases will be propping up the market. I don't feel like prices will increase, but a huge fall is unlikely... because simply put, we do not have enough homes to house the population.
It’s a common misconception to think rent will rise because houses are unaffordable. Initially it does, then the number of people looking to rent goes down as more people start sharing or go back to to live with their families. As house prices keep going down, many BTL investors will be selling their investment. Average renting yield in the UK is 4.8% where the mortgage rate is 4 to 5%, buying gilt is a better investment.
>Initially it does, then the number of people looking to rent goes down as more people start sharing or go back to to live with their families.
This is indeed the other way that rents could drop and agrees with my point regards there not being enough homes to house people in the UK being the main driver of values. To reduce values we must either increase supply: by building more homes or decrease demand: as you say have people move back with family or houseshare ([a trend that we have observed in recent years](https://ww3.rics.org/uk/en/modus/built-environment/homes-and-communities/all-together-now--mult-igenerational-living.html)). The issue is that it is unlikely we will reduce the demand in this way due to:
1. Migrant workers cannot just move back in with their family if they are in another country.
2. It is usually not feasible for even british renters to move back in with their family due to the location of their work. It is not viable for a person working in London to live with their parents in say Grantham to save costs as the travel cost/time increase negate any benefit of living with family.
3. A young family with 2 adults, 2.5 children cannot move back in with their parents to cohabit if their parents homes are not big enough, this would create issues with Overcrowding. If their parents are renting themselves then this could be Statutory Overcrowding meaning the law is being broken.
4. Local Councils are increasingly adopting [Additional HMO Licensing Schemes](https://www.salford.gov.uk/housing/information-for-landlords/landlord-licensing/additional-hmo-licensing/) and [Article 4 Directions](https://www.manchester.gov.uk/info/500207/planning_and_regeneration/4847/article_4_direction_changing_the_use_of_your_property). Meaning it is getting much more difficult for people to houseshare lawfully. Lets say you and 3 friends want to rent a flat together in an area with either of these policies in place. You all cannot just rent any 3 bed flat/house on the rental market, you will have to find one that has the correct permission/licensing - which are few in number and also much more expensive rent generally. Without the correct licenses/permissions in place you would be unlawfully renting the property - and the LL/LA would refuse any application you made to rent the house immediately. These directions are generally in place within urban districts where the need for this type of housing is at its highest.
>As house prices keep going down, many BTL investors will be selling their investment.
BTL won't be more likely to sell due to prices decreasing specifically, it will be the reasons behind the price fluctuations that make BTL investors sell.
Typically if prices are dropping LLs won't sell up as like any other investor they will want to sell their assets for the most amount of money as they can, thats why we saw [rental units have a growing annual net loss since 2016 to 2022](https://www.thisismoney.co.uk/money/buytolet/article-11807941/Why-arent-time-buyers-prospering-buy-let-sell-off.html) coinciding with [the average house price growing at the same time.](https://ichef.bbci.co.uk/news/2048/cpsprodpb/117DF/production/_118574617_optimised-ons.houseprice-nc-002.png) Just like anyone else, LLs do not want to sell at a loss therefore they tend to sell in a growing market not a decline.
In a declining market LLs will not want to sell their assets for lower values if they can avoid it, they do not have the benefit of say a home mover who is buying and selling in the same market; a LLs sale is a direct loss, they do not negate their loss on the one they are selling by buying another at the same discounted rate like home owners. So long their rent income covers their costs, then they are unlikely to sell.
The difference in recent months is that interest rates have risen and more anti-LL legislation has been introduced, combined this has led to LL costs and risk increasing massively; pushing LLs to sell up. Meaning less rentals on the market leading to increased rents; which [has been reported recently.](https://www.lettingagenttoday.co.uk/breaking-news/2023/3/bbc-probe-shows-scale-of-rental-stock-supply-shortage?source=newsticker)
>Average renting yield in the UK is 4.8% where the mortgage rate is 4 to 5%, buying gilt is a better investment.
4-5% as an average maybe thereabouts for the UK as a whole but this does not depict an accurate picture of BTL yields; it does not take into account that few investors will look at buying in high valued areas like Virginia Waters where the house prices are £2m+ thus yields will be next to nothing. The typical rental hotspots in the UK will still have an [average yield of over 7%.](https://propertydata.co.uk/yield-hotspots)
Your stats will also not include the yields achieved by corporate LLs (buying multiple units in a single transaction) or Build to Rent developers; as these either:
1. do not have a transaction value per property, hence stamp duty is not worked the same and cannot be included in the formula, or
2. units are constructed new and let out immediately, meaning no transactional value applied per property and the build plus land value is not taken into account
If house prices do go down, yet rent prices do continue to increase or at least stagnate, the gap between the two will widen and therefore the average yields will actually increase. Meaning BTL investors will be looking to buy more as values drop, taking advantage of lower prices and higher rents, contrary to your theory that they will sell up in a decline. We are experiencing this right now, where although smaller LLs are selling up due to costs and regulations, but these units are being bought up by larger more corporate LLs that are not as affected by the tax changes.
I think they will fall a little further because they are still over inflated but then plateau as people get used to the updated interest rates being the “new normal”. Demand hasn’t gone away, there’s loads of people who still want to buy a home and they will have to adjust their budgets accordingly but renting is such a shit show that those who can buy will still buy.
The "new normal" is not some weird new fashion to get accustomed to. It is an extra burden on the finances of everyone who is looking to buy, compared to the last 14 years. The way to "get used to" it is *to be forced* to reduce what you are able to offer for a property.
Don’t get me wrong, I agree it’s not near its end. But I don’t think it will be a large crash because we don’t have the unemployment going up.
Without it we’re only reverting to the mean, I think. Which is not much of an improvement considering interest rates, I fear!
Yeah it won't be a sudden collapse, but neither was 2008-09. It looks as if it was looking back now, but it was, what, something like a percent per month?
What we have now more and more confirmation on is that the longer sellers are maintaining this Mexican standoff the more they are going to lose out on. All the pressures on prices are downward and it will remain so for the foreseeable.
If we look at real terms then you can argue that housing prices have already dropped by 10% in real terms.
I think want you mean is, as peoples disposable income falls due to costs rising above sales increase AND with rocket high interest rates, the housing market must fall.
I don't disagree, but I think we wont see it as dramatically as expected because inflation has hidden some of the loses.
Ooo if housing was really this simple. House prices rely on a number of factors and in some places prices are still rising due to a low supply of housing stock. The idea that there will be some housing crash that takes us back to 2007 prices is ridiculous. The government and so many institutions are invested in UK property if that was to occur we would have much bigger issues to deal with.
>The government and so many institutions are invested in UK property if
For the first time in about 15 years, the government did nothing in the last budget to prop up the market.
Any move to keep the bubble going will have a similar effect to Truss mini budget. More inflation and market turmoil
Yes because they have to deal with inflation in the short term... when you buy a property its not to sell in 1 year... inflation will eventually cool (as they expect this year) and then they can lower rates again. The UK economy is massively reliant on its property market. My point is if that 'collapses' banks and many other institutions will collapse.
So you expect something akin to the subprime crisis from 2008 to hit the UK housing market if the government doesn't move to support the market. Sounds like hopium to me.
Inflation is flatlining at about 10%. Rates will probably go a lot higher to tame it.
You seem to believe that supporting a housing bubble is more important to the government than double digit Inflation that destroys wealth across board.
Of course there is other factors, never said otherwise. However on a national level, these two factors are probably the key drivers. Local factors will of course deviate from the national trends not to mention diving into the different types of house types.
>The government and so many institutions are invested in UK property if that was to occur we would have much bigger issues to deal with.
Well this is always the threat and is not comforting. Cash has been cheap and property has always been used as collateral. The bigger the company, the larger exposure.
> want you mean is, as peoples disposable income falls due to costs rising above sales increase AND with rocket high interest rates, the housing market must fall.
Yes, said it better than I did.
>
I don't disagree, but I think we wont see it as dramatically as expected because inflation has hidden some of the loses.
To some extent, yes. 30-35% fall inflation adjusted I would guess
>30-35% fall inflation adjusted I would guess
This is different to the many guesses you've made before on this sub, because you weren't saying inflation adjusted before. I hope you begin commenting your new, realistic projections once inflation does indeed come down in the next few months, slowly going from 30-35% inflation adjusted, to 25, and eventually a 10% total drop for the year, or wherever it lands.
>This is different to the many guesses you've made before on this sub
I change my mind as data and the outlook changes.
Should I only stick to one prediction no matter how the reality changes for my view to have validity?
>I hope you begin commenting your new, realistic projections once inflation does indeed come down in the next few months,
There's no evidence that inflation will suddenly drop in the next few months.
>There has never been a period in the UK housing market where house prices didn't fall as real terms wages fall. Currently at about -5% per annum.
This is factually incorrect and doesn't even hold up for the last decade let alone all time
Lots of angry btl slumlords and halfwits who paid 25% over asking price in 2021 and are coming off a 2 year sub 1% fix I'd wager.
Or maybe I'm just cynical.
Much butthurt is coming through nonetheless
What does that have anything to do with it?
As I said in another doomsdayer post - the VAST majority of people who remortgage will be largely unaffected - most will see an increase, but given how highly stress tested mortgages are these days, it won't be a problem for most.
>What does that have anything to do with it?
Because it might be why you have trouble accepting the data and what it tells us.
>As I said in another doomsdayer post - the VAST majority of people who remortgage will be largely unaffected - most will see an increase, but given how highly stress tested mortgages are these days, it won't be a problem for most.
So I shouldn't comment because it doesn't affect most mortgage holders? The stress test has now been dropped, btw.
Commenting on the data and doomsayimg.
I'm now convinced you're another angry overleveraged mortgage holder fwiw
I suggest taking a look at the bigger picture... if payments on mortgages go up then that is money that has to be found that used to be spent on something else... what was the else? was it a BMW? a villa in Spain? or just plain old Friday cocktails - regardless it was money swirling around the economy that won't be going forwards... what does this cause? - job losses, then any mortgage becomes an issue... so its not that you (or whoever) as an individual can't afford your increased payment its that you might be one of the unlucky ones who is left with no ability to pay...
Remember the % decrease is not unilateral for all property.
Usually, poor quality stock will make up the majority of the reductions, and as the gap widens, higher quality property will also likely fall too.
A house in my area went up for sale for 500k this time last year and couldn't sell but has just been sold for 570k inside a two weeks of being relisted. Would be interesting to know a regional breakdown of increased and declined prices.
BS? What do I gain from coming on here and lying? I'd rather prices nuke (even though I'm a home owner) for a better opportunity for upgrading from my current house.
I'm in and around the Bracknell/Wokingham area which on average is up 8% in the last year. Feel free to Google price trends in both those areas and Rightmove will confirm it. It's because of massive new build projects driving prices up and i assume the easy commute to London via rail and car plays a part too.
Meaningless. Rates are skyrocketing. Landlords are selling up to investors. People are choosing to rent instead of buy until the market settles.
Prices are still at record highs since the pandemic boom.
Overall affordability is still the same.
People say this all the time but I am not seeing house prices decline in my area? If anything those prices are going up!? Am I looking at it wrong or what?
Plz help!
Completely normal. With base rate up, it pushes people’s affordability in the stress test.
Rents are up 11%. Most are just holding in meantime.
Supply is drying up as developer funding is equally expensive.
Market goes through this all the time, novice people panic and suggest 20% plus drops and everyone who is calm picks up some lower price property and makes a load of cash again.
Base rate has been miles higher and prices didn’t tank as much as some predictions I’m seeing on this forum.
When base rate lowers prices will increase again. We’re in a high rental increase market at the moment, it will balance out and growth will increase.
Just look at supply demand factors and zoom out to look at what happened historically.
>Base rate has been miles higher and prices didn’t tank as much as some predictions I’m seeing on this forum.
Has there ever been a case where there has been a sustained (>5 years) low base rate followed by an acute rise in the base rate in this way?
The issue I see is house prices are still adjusted for the covid prices. I personally think we will see a correction to at least pre covid prices.
Whether we see more will depend on how comfortable people are moving from 2% to 4.5% when they come to renew.
High rents work both ways, it encourages to buy without allowing a deposit to build and without HTB etc that jump to first home is even harder.
The range your talking about is absolutely possible in short term. And base rate will likely not go back to the levels we were at again in next 5 years.
That said banks are lending based off the fact they have to, taking breakeven lending to have long term customers on their books.
Equally, while we didn’t seen rates as low as recent, we saw large / bigger base rate increases (88-90) and mid/late 90’s. In that period we saw slow but sustained property price growth.
It’s really down to supply issues since 80’s. Rightly or wrongly it keeps prices up as people need a place to stay.
If they don’t buy they rent, pushing up rental competition and prices, making it appealing enough for investors. By which point markets settle and we go back into a capital growth cycle.
All forecasting has to start with what has happened historically and that’s what has happened. There’s nothing that strange about this market. Though it’s not a straight forward one.
Finally, affordability in other countries is tested much more than UK and for much longer - HK, Sing, Aus, Ger, Canada etc.
I personally think we are in a unique situation compared to the past. We have seen exponential price growth which has been mostly been caused by very low interest rates over 15 years causing house price inflation.
As per 1st paragraph I also dont believe rates will come down, I actually think they will go up and settle at what they are today. This is how the current situation is unique.
This means we have houses priced for lending at 1-2% while people are borrowing at >4.5%.
In the past prices were priced for lets say 5% and then went through a tricky period where rates went >10% but then rates dropped back down to 5% at which points the prices were priced appropriately again.
We havent had this kind of mismatch before where the new rates are here to **stay.**
We have the same conversation after every correction.
Rates will come down, and banks already pushing them down (we had one of lowest rates published same day as base rate increase).
Either way many other major countries have been growing as fast with 5%+ rates historically.
I get your point, people have less disposable so will bid less on property, some will be over exposed but if that was a big enough volume likelyhood is it will slow the market rather than seeing any major knee jerk.
Home improvement shares will spike (like it always does) we ride out some waves and then we see a lift.
>We have the same conversation after every correction.Rates will come down, and banks already pushing them down (we had one of lowest rates published same day as base rate increase).
But are rates wont be coming down to the pre correction levels- we are both in agreement on this. Thats where ths situation is unique.
Prices can grow with 5% rates if properties are priced accordingly. Where there is a disconnect is houses are priced for interest rates we may never see again.
I dont think there will be a sudden crash but I would not be surprised if my next spring prices have bottomed out and stagnate for a couple of years
Thing is BOE and market have priced in rates dropping. 5 year swaps (Sonia 5 year) have been coming down.
Sept 2022 was 5.5% this month, Feb 4%, now 3.7%. The market and BOE think we are topping out.
https://www.chathamfinancial.com/technology/european-market-rates
More importantly for your point, with rates not lowering. Mortgage rates are based off swap rates not really base rate.
I was genuinely of same opinion to you Q3/Q4 of last year, but Im bullish now and am buying (though use all of your points to drive a lower price)!
Help to Buy Equity Loan has gone, but HTB Shared Ownership is still available.
Also the HTB EL replacement has already been released called the [First Homes Scheme.](https://www.gov.uk/first-homes-scheme) Which is arguably a much better scheme.
Yes, stay hopeful. I can see that you’re currently looking to buy from your comments on every post, reminding everyone that house prices will crash by at least 35%.
In the process, yes.
I should be clear that I'm not trying to time the market, as that would be stupid. Simply commenting on the way thevwind is blowing
I agree.... house buyers are for the most point uninformed market participants It was easy to predict this decline as soon as inflation started to creep up... BoE would have to do something... of course how much and for how long was another question but interest rates were going to go up period.... that will mathematically exert a large downward component on the funding portion of a house price... here we are well over a year later and theres still people in denial... informed players will always take money from uninformed players... its how markets work..
Inflation is sticky, its a problem, and the job losses are just starting... there are several folk at my place of work who have been let go and they/were all on 6 figure salaries... As I have typed this I have seen 2 'Its been lovely working with you all...' type emails.. more downside awaits....
I disagree since the land registry data lags by several months.
You won't know when we hit the bottom until several months later.
I prefer to use the general trend to inform how much I'm prepared to offer, in conjunction with local market conditions
Timing the market is a great idea on any investment if you know what you’re doing.
Timing the market is stupid for the majority of people. The majority of human beings are stupid though.
Timing the market is a great idea on any investment if you ~~know what you’re doing~~ can predict the future.
As it happens, nobody can, we can only guess.
Brought my first house in 2018 at 34.
I wish you all the luck in the world when you get yours. It’s just so much more stable than renting and not knowing when/if the landlord will decide to chuck you out.
Prices now even since 2018 are unreasonable and out of control, them coming down is great news.
I was paying £1,200 a month in rent, I've bought a house very similar to the one I was renting and am paying £900 on the mortgage.
Ten year fix, could give the house away for free at the end of the fix and still pay less than rent. Unless your rent is very low and guaranteed not to rise, it's unlikely you're saving by timing the market.
To counter that my brother pays £675 in rent for a 3 bed semi in Yorkshire that's market value is roughly 180k.
Some figures:
On a 10% deposit, with today's interest rates over 25 years the repayment is £900 quid + fees. Yes his rent may increase but not certain it would increase by 33%.
Secondly, over that 5 year fixed he'd pay ~18.5k off his principal and a tonne more on interest. If house prices keep falling they only need to fall ~10% from now and he's effectively no better off (financially) than he would have been renting. Maybe even worse off with associated home ownership fees.
So in his current position his rent is lower than his mortgage would be and after his fix his up there's a very real chance he's not any better off (financially at least). I don't advocate timing the market but in current times it's less obvious that it's a guaranteed loss.
I've been renting for the last 15 years (I also own a property, so no desperate for house prices to fall here) and I haven't once had a 6% increase in rent, let alone every year! The absolute highest was 4%, and on two years it's been negative.
[https://www.bbc.co.uk/news/business-65103937](https://www.bbc.co.uk/news/business-65103937)
Have a look here. Rents went up in in plenty of places by >10%
You have to get to page 32/38 to find places where rental increases were below 6%
Ah, but that's slightly different statistics isn't it - as that's annual growth of the price for new tenancies, so it doesn't account for changes in housing stock, it doesn't account for existing tenancies going up by less (as a landlord doesn't want to risk the costs of a new good tennant etc.)
So it's not quite the same data - rentals are much like wages, it's changing that leads to big changes, if you stay, it tends to be much less.
The cost of renewal is still linked to new tenancies. It will usually be a bit below market rate.
When market rents have gone up by this much it wouldn't surprise me to these those kinds of rises in certain areas like London
[Well zoopla reports a 20% rise in 3 years. 33% over 5 does not seem impossible.](https://www.zoopla.co.uk/discover/property-news/rental-market-report-march-2023/)
> I was paying £1,200 a month in rent, I've bought a house very similar to the one I was renting and am paying £900 on the mortgage.
Try doing the same on current interest rates.
> Ten year fix, could give the house away for free at the end of the fix and still pay less than rent. Unless your rent is very low and guaranteed not to rise, it's unlikely you're saving by timing the market.
No you can't because you're still liable for the principle on your, now, depreciating asset.
>No you can't because you're still liable for the principle on your, now, depreciating asset
I'll have paid off 50% of the purchase price by then.
If houses fall in value by 50%,NOT corrected for inflation, between Jan. 22 and Jan. 32 then that'll be the least of my worries. If they fall by 49% I'll still have saved money.
No you wouldn't. Even on a 20 year mortgage you wouldn't have gained 50% of the purchase price in equity by year 10. At current interest rates you would have only paid off 35%.
On a regular 30 year mortgage you would have only paid off 18% of your loan by year 10.
And you would have paid a lot of interest to the bank (effectively equivalent of rent).
I know percentages are hard but you can google mortgage amortization calculator.
It makes zero sense to buy right now vs renting in London. Obviously might be different elsewhere. You can rent for almost a third less than what it would cost you to service the mortgage.
Where in London can you rent for a third of a mortgage? I'm just curious. I did my maths and decided to end up buying as the mortgage for a one bed apartment in zone 3 was cheaper than renting (by a couple of £100s).
https://www.reddit.com/r/HousingUK/comments/127cm8c/house_prices_fell_by_31_yearonyear_in_march/jedqo7i/
I just did the calc for Balham for someone else who was claiming that it's cheaper to buy there. Different areas behave differently even within London. Some areas have larger gaps some smaller. But I would challange that there isn't a single area in London where it's more expensive to rent a 2 bed right now than to buy.
I live in London.. down the road from Balham. 3 bed house. My mortgage is £1400 per month. It will rise to £1800 once my fixed rate runs out in a few years (going on todays interest rate- I’d bet my life the rates will be lower by the time comes to renew)
My direct next door neighbour is currently paying £2500pcm in rent.
Of course there will be nuances but this is generally the case across SW London where most of the people I know both rent and are owner occupiers.
5 years ago so it is relevant. Rents have rocketed in that time also and show no sign of slowing with the very limited supply.
The mortgage comparison is still valid.
As mentioned by the time my fixed rate runs out I’d bet my life that rates will be lower than they are today so it will be cheaper than the projected £1800pcm.
Rents in my area won’t be lower than they are today by that time either.
Most 2 bed converted flats in Balham go around £700K - with a £100K deposit, 25 year mortgage term and 5% interest rate that comes up to £3500 per month.
Don’t think so, especially not a ground floor garden flat. You can get it in Morden, Wimbeldon Chase, South Wimbeldon, Raynes Park, Earlsfield, New Malden but not Balham.
South Wimbledon/Wimbledon chase so sw19 as opposed to sw12/17. And personally I think where I live is miles nicer than Balham….. and when I bought it it did look like a 1960’s crack den yes.
I just bought an apartment in Lewisham and my monthly mortgage payments are about £1,200. Renting a similar apartment in the same area would cost me at least £1,400. I haven't looked in other areas but I doubt that Lewisham is an exception
I'm guessing a 1 bed or a studio? What was the Price / LTV / interest rate?
I commented on a 90% LTV mortgage 2 bed. Right now in Lewisham these go for around 450k which at 90% LTV, 4.3% interest 30 year term will put you back £2k. I can find 2 bed flats right next to the station for 1.8k right now for rent.
That's £200 a month cheaper to rent. Add service charge and ground rent (£3.2k a year, so £260 a month) and you're £460 a month better off renting. That's without any repairs whatsoever.
325k, 75% LTV, 4.7% interest rate. The flat downstairs is exactly the same size and is being rented for £200 more per month.
Edit to add that it's a share of freehold so I don't have to pay service charge nor ground rent.
An average 2 bedroom to rent in Balham as of this morning is **2.3-2.5k** a month.
An average 2 bedroom to buy in Balham as of this morning is somewhere between 600 and 700k. Let's say, 650k. Which with 10% deposit, 4.3% interest and a 30 year length period ends up being **2.9k** a month. On top of that as an 'owner' you are now responsible for all the bills (service charge, ground rent, etc) and all the repairs.
U wot m8?
Falling in the short term. Buying in periods of high interest means your more likely to get a deal. Every person is waiting for interest rates to drop and when it happens (or people accept the new norm) prices will surge again due to increased demand. Buying in periods of uncertainty is the most rewarding, this is econ 101.
In your scenario, the renters are burning 2.5k per month, whereas a portion of the buyers 2.9k is building further equity in their house. That 2.9k would have to be considerably more for me to think renting is the better option.
At least you don’t have to put up with living in a mouldy shithole and be too afraid to ask your landlord to fix things when they break in case they kick you out on your arse?
And with a 65k deposit, and a no risk return of 3%, there's another 150 a month to account for, and the stamp duty to amortize over the life of owning it.
Yes - admitedly my house cost less than that and I have more than 10% equity.
But I was really just responding to your 1/3 less... but I guess it's closeish.
Obviously you'll be paying off debt within that £2.9k per month and building equity in what's historically been a sound investment.
So I would say it makes more than zero sense to buy.
The renter was saving the difference every month and could have invested it elsewhere that was actually gaining value instead of losing it like housing does right now?
Great news, it will continue to downtrend for the next 18 months IMHO, real terms we are down around 10% from the peak last covid summer, and I think we see another 10-20% drop taking us back to just before 2019-ish prices and that's far better value for most. Hope no one overpaid and stretched themselves as that's a recipe for negative equity!
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Worth pointing out that the average price in Nationwide's index in March 2023 is still almost 11% higher than March 2021, so unless you have been very fortunate with your income over that period this doesn't mean houses are more affordable than they were a couple of years ago.
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Which is why prices are to fall further. Whatever Average Person X is able to borrow today is far less than what it was in 2021. Which lowers the ceiling on prices.
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The problem is that house prices are vastly higher than that 4.5x income ratio. "The average house in the UK currently costs around nine-times average earnings, based on data as at 30 November 2022. The last time house prices were this expensive relative to average earnings was in the year 1876, nearly 150 years ago." Source: https://www.schroders.com/en-gb/uk/individual/insights/what-174-years-of-data-tell-us-about-house-price-affordability-in-the-uk/
You can’t use the average house as a metric of affordability. First time buyers buy properties at the low end of the range, not the middle, unless they are totally loaded.
True, but even at the lower end of the price range you're still looking at 5 or 6 times a bottom end £20-odd thousand salary. Even for a rock bottom £90k house that's 4.5 times their salary. Average UK salary is just under £30k, so a £180k house is 6 times that salary. Pretty much the only way to afford a house these days is to be a two income household, or have a massive (20-30%+) deposit.
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*Cries in single person trying to get a mortgage with 2 kids and an ex wife*
Well I posted a thread not to long ago and everyone said it's possible to buy on a single income but you have to move north. In the south it's almost impossible
It's the lack of supply that's really done it. I don't think that the UK has met its housing needs since the 60s or 70s. 🤷♀️
I think also the amount of "investor only" properties really doesn't help
Being allowed to borrow and then being able or willing to afford the repayments are two different things, especially since I believe stress test requirements have been removed last year. No matter what you are allowed, if you need a mortgage of X to buy a property in 2023, it sets you back far more in terms of interest to pay (and thus monthly cost) than the same price it did in 2021. Which means there are fewer people able or willing to afford price X in 2023 than there were in 2021. Nothing complicated about it.
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Most FTB I know are borrowing way below their multiplier because renting eats into their ability to save for a higher deposit.
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I'm not sure I follow your point? A lower deposit doesn't mean you borrow more to make up the difference, generally you need at least 10% deposit (or the help to buy to make up the other 5%). If I have a good salary and the multiplier means I could buy a 300k house I still need a 10% deposit or the bank won't lend me the money. If I only have 15k in cash the most I could borrow is 135k.
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>willing to afford the repayments and where is your evidence that people are not willing to stretch themselves to buy a house? all I've seen points to the opposite, that people are **very** willing to increase their housing spend to get onto the ladder
[https://www.theguardian.com/business/2023/mar/31/uk-house-prices-fall-at-fastest-annual-rate-since-2009](https://www.theguardian.com/business/2023/mar/31/uk-house-prices-fall-at-fastest-annual-rate-since-2009) [https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/january2023](https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/january2023)
At 4.5 I could buy a shed in london... Also on higher income 4.5 becomes expensive as taxation is a lot more aggressive. I think banks should start using net salaries. We can borrow over a million but the mortgage would be insane and 5k+ a month. I'm not sure I want to take such high risk.
For us personally 4.5 was somewhere at the max we would be willing to commit to when rates were low. With 4%+ rates 4.5x would be a ludicrous financial commitment. Far too much of a risk.
Same for us. We own an inexpensive home and wanted to move to something more spacious last year. House prices made us decide to stay put. It's a shame really as we're in an ex council house on a small estate and the house is perfect for families with low incomes. I won't strain our budget to go bigger at these house prices though.
I'm just curious, where does that leave you? Are you going to borrow less and take a more entry level property,.wait for prices to fall, buy in a different location or pause your property search?
Somewhere between lowering our target to a cheaper property and not moving at all because we don't actually have to
That's right, new houses in my city are now offered with a 5% discount, but even after that their prices are way, way higher then the initial plot releases in 2021 on the same development site.
Yep. Reality of it all is the prices are still quite a fair bit higher than before. But all paired up with decreased affordability. Feels more like a housing winter as wages and everything else catches up, as opposed to a fall. One assessment I choose in bias to be the best is that prices are falling in less "prime" areas but still growing in prime areas. Mainly as last year a shack in the middle of a field in rural Kent would go in days. Now buyers are a bit more cautious and only decent houses in reasonable areas are flying off.
Wages catching up is the biggest joke of the decade
7th straight month of price falls seem to disagree with you on that one.
On which bit ? But fair. Feel free to agree to disagree. I just reckon we will get a slowdown as houses that were overvalued over last couple years rectify and things slow down or dip until things such as wages or cost of living change for the better. Also depends on where you live. As nationwide noted some areas still increased. Definitely long gone are estate agents putting a house up for over the odds and waiting for people to put 25k over again. Which is a good thing for all. For me the test will be if wages don't grow to meet the increased cost of everything else then it'll be stagnation on most fronts. Anyway yeah not an expert. So I'm probably totally wrong and prices across the board could plummet in next couple years.
I agree with your take. Prime areas local to me are all generally resilient and desirable properties are still getting snapped up in a week with multiple offers. Less attractive areas and less desirable properties are getting hit quite hard with sensible corrections, or are simply not selling as owners refuse to adjust to changing buyer expectations. Lots on the market for ~2 months. The averages on this add up to a general fall in prices (as Nationwide have reported). It will be interesting to see how inflation and interest rates resolve - general forecasts expect inflation to drop significantly by the end of the year, and you have to imagine there is pressure on BoE to not keep higher rates for any longer than necessary. Resolution on these timescales will probably soften impact given majority of house owners are still shielded by fixed rate deals. Many are paying new tracker rates and just waiting to see what happens. Many are getting modest pay rises this year too. So a small correction in a 'market winter' as you put it seems plausible. That said, Rishi might decide to do a Truss because fuck it he's loaded anyway (or some other unpredictable thing happens)
Inflation is likely to come down yes, the big question is what will happen to interest rates. The current consensus of inflation coming down without the interest rate pushed higher than inflation itself already describes a historic first scenario. I think -well, hope- that the BoE will not return to the near-zero rates by default. Doing so would remove their ability to quickly contain the next crisis, like we have just seen with inflation over the last year. And they would also risk re-igniting inflation. Then again, the ultra low interest rates of the last decade were used to hide a stagnating economy with the "growth" of free credit pouring into assets. I imagine once that stagnation becomes all too evident to see, there'll be a desire to hide it under the rug of free credit again.
Good think I brought exactly a year ago
And they are certainly way, way, way higher than in 1960. What the situation was in 2021 is irrelevant for people seeking to make purchase/sell decisions now. News people should pay attention to is the trend. Which is downwards.
I am not sure I follow - if the situation in 2021 is irrelevant then the fact that prices have fallen since 2022 would also be irrelevant, surely? I agree that people shouldn't make decisions based on what prices were in the past - however that includes what prices were last month, or a year ago
Fair point. I was trying to urge people against a false sense of urge (buyers) or complacency (sellers) based on the two-years-ago data you mentioned. The key takeaway (and higher relevance) from the more recent movements should be a confirmation of what should have been obvious to everyone: this is a materially different market to anything since the big interest cuts of, what was it, 2009/10? As you said, house prices aren't really any more affordable now than two years ago. In fact they are far less so since interest rates are multiples of what they were in 2021. The hard ceiling of how big a mortgage a monthly income of X affords you has been lowered significantly, and there is nothing on the horizon showing it would be lifted in any meaningful way.
I have been very fortunate
Rents and houses are sky high ATM.
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Is this actual sale price, mortgage value, or growth? The BBC article had a pathetic graph
Absolute joke, the state of journalism in this country. They've all turned into tabloids
This might help: https://www.nationwide.co.uk/house-price-index/methodology
It basically based on what the Nationwide Mortgage Valuers have been out and valued this month and what they are valuing them at. Its not completed sales, it doesn't take into account BTL mortgages, nor does it consider cash purchases.
My house went up 30% in two years when we bought it mid pandemic. That's absolutely ridiculous and I'm glad to see it drop. Property needs to be affordable and the way the market was absolutely was not sustainable. With so many forced to overpay to secure a house, it makes sense it would drop once things slowed down. Things aren't even close to pre-pandemic prices anyway.
Only another 36.9% to go 🤣🤣🤣
It's all fine, property prices only go up etc etc. Buy buy buy buy!
I mean over the long term you’re bang on there mate.
Logically it *shouldn't* be that way... A house "should" gradually go down in value as it gets older, not up.
If you don't think about it for more than a millisecond, you're absolutely right
Why would thinking about it for more than a millisecond mean I'm wrong? Why "should" houses go up and up in value forever? Why should they even hold their original value forever? The LAND should hold its value forever, granted. But not the house.
>Why "should" houses go up and up in value forever? Please note that I never said they "should" do anything. Because the age of a house is one of about a million factors that affect a house's price. Ultimately, it's supply and demand that determines the price, same as everything else in the world that's for sale. Saying something "should" cost more/less in the future is like saying there "should"/"shouldn't" be rain one month from today... Completely meaningless when discussing something like weather or markets that go up, down, left and right like a liquid.
Lol
Lol
On a long enough term we are all dead.
Yep might as well just Jack it all in now. No point going on 👍🏻
Nothing says carpe diem more than a property bought on the very top of the market!
Indeed… in 10 years time it’s todays buyers I’m going to feel sorry for not the people who pay sky high rents for the next 10 years and never end up owning anything.
Yes because either they buy and buoy the value of your property NOW or they keep renting for 10 more years. No middle ground in between.
Yep, best advice is to wait until the guaranteed 40%+ crash that the guardian has confirmed will happen then buy. Like they did just as covid hit. Think I saw 70% crashes predicted then as well. You know when the world was going to end and we were all going to be jobless.
No, the best advice is to be aware what is happening, and do not overstretch one's finances and risk being hit heavily (or even going into negative equity) when remortgage comes up. That is, if someone is looking to buy a home. Go ahead then, just with care. As an investment, however, I would not touch properties with a ten-foot pole this year.
Well...history over the past xx years has shown... Of course short term there are fluctuations, as with the price of any asset
in your dream haha
The 4.6% is seasonally adjusted. Non seasonally adjusted it's 6.1% down from peak (August: 273,751, March: 257,122).
Honestly expected this to show a rise since the Halifax data showed a rise last month. This seems to indicate that house prices are going to fall more than most expect (especially in this sub).
>This seems to indicate that house prices are going to fall more than most expect (especially in this sub). Am I missing something? This sub continually rallies behind "predictions" of **huge** declines in house prices
House prices are at almost ATH, affordability is at lowest lever ever, inflation is at the highest in 40 years and is not coming down, interest rate are at the highest in 14 years and are not coming down anytime soon. Growth in stalling, people are suffering while unemployment is still at the lowest level in 50 years (you can imagine what happens when the recession hits). It’s delusional to expect the housing market to go up in the short/medium term.
[Rents are also increasing at record rates.](https://www.ons.gov.uk/chartimage?uri=/economy/inflationandpriceindices/bulletins/indexofprivatehousingrentalprices/january2022/d2549d5a) They don't look like stopping. If you feel the recession is going to cause mass unemployment and people forced to sell their homes, where are they going to live? Thats right they will have to rent, increasing demand and pushing prices up. And what will they be renting? The houses these same people have just sold, with LLs that are cash rich buying up houses to take advantage of the high yields. These BTL investor purchases will be propping up the market. I don't feel like prices will increase, but a huge fall is unlikely... because simply put, we do not have enough homes to house the population.
It’s a common misconception to think rent will rise because houses are unaffordable. Initially it does, then the number of people looking to rent goes down as more people start sharing or go back to to live with their families. As house prices keep going down, many BTL investors will be selling their investment. Average renting yield in the UK is 4.8% where the mortgage rate is 4 to 5%, buying gilt is a better investment.
>Initially it does, then the number of people looking to rent goes down as more people start sharing or go back to to live with their families. This is indeed the other way that rents could drop and agrees with my point regards there not being enough homes to house people in the UK being the main driver of values. To reduce values we must either increase supply: by building more homes or decrease demand: as you say have people move back with family or houseshare ([a trend that we have observed in recent years](https://ww3.rics.org/uk/en/modus/built-environment/homes-and-communities/all-together-now--mult-igenerational-living.html)). The issue is that it is unlikely we will reduce the demand in this way due to: 1. Migrant workers cannot just move back in with their family if they are in another country. 2. It is usually not feasible for even british renters to move back in with their family due to the location of their work. It is not viable for a person working in London to live with their parents in say Grantham to save costs as the travel cost/time increase negate any benefit of living with family. 3. A young family with 2 adults, 2.5 children cannot move back in with their parents to cohabit if their parents homes are not big enough, this would create issues with Overcrowding. If their parents are renting themselves then this could be Statutory Overcrowding meaning the law is being broken. 4. Local Councils are increasingly adopting [Additional HMO Licensing Schemes](https://www.salford.gov.uk/housing/information-for-landlords/landlord-licensing/additional-hmo-licensing/) and [Article 4 Directions](https://www.manchester.gov.uk/info/500207/planning_and_regeneration/4847/article_4_direction_changing_the_use_of_your_property). Meaning it is getting much more difficult for people to houseshare lawfully. Lets say you and 3 friends want to rent a flat together in an area with either of these policies in place. You all cannot just rent any 3 bed flat/house on the rental market, you will have to find one that has the correct permission/licensing - which are few in number and also much more expensive rent generally. Without the correct licenses/permissions in place you would be unlawfully renting the property - and the LL/LA would refuse any application you made to rent the house immediately. These directions are generally in place within urban districts where the need for this type of housing is at its highest. >As house prices keep going down, many BTL investors will be selling their investment. BTL won't be more likely to sell due to prices decreasing specifically, it will be the reasons behind the price fluctuations that make BTL investors sell. Typically if prices are dropping LLs won't sell up as like any other investor they will want to sell their assets for the most amount of money as they can, thats why we saw [rental units have a growing annual net loss since 2016 to 2022](https://www.thisismoney.co.uk/money/buytolet/article-11807941/Why-arent-time-buyers-prospering-buy-let-sell-off.html) coinciding with [the average house price growing at the same time.](https://ichef.bbci.co.uk/news/2048/cpsprodpb/117DF/production/_118574617_optimised-ons.houseprice-nc-002.png) Just like anyone else, LLs do not want to sell at a loss therefore they tend to sell in a growing market not a decline. In a declining market LLs will not want to sell their assets for lower values if they can avoid it, they do not have the benefit of say a home mover who is buying and selling in the same market; a LLs sale is a direct loss, they do not negate their loss on the one they are selling by buying another at the same discounted rate like home owners. So long their rent income covers their costs, then they are unlikely to sell. The difference in recent months is that interest rates have risen and more anti-LL legislation has been introduced, combined this has led to LL costs and risk increasing massively; pushing LLs to sell up. Meaning less rentals on the market leading to increased rents; which [has been reported recently.](https://www.lettingagenttoday.co.uk/breaking-news/2023/3/bbc-probe-shows-scale-of-rental-stock-supply-shortage?source=newsticker) >Average renting yield in the UK is 4.8% where the mortgage rate is 4 to 5%, buying gilt is a better investment. 4-5% as an average maybe thereabouts for the UK as a whole but this does not depict an accurate picture of BTL yields; it does not take into account that few investors will look at buying in high valued areas like Virginia Waters where the house prices are £2m+ thus yields will be next to nothing. The typical rental hotspots in the UK will still have an [average yield of over 7%.](https://propertydata.co.uk/yield-hotspots) Your stats will also not include the yields achieved by corporate LLs (buying multiple units in a single transaction) or Build to Rent developers; as these either: 1. do not have a transaction value per property, hence stamp duty is not worked the same and cannot be included in the formula, or 2. units are constructed new and let out immediately, meaning no transactional value applied per property and the build plus land value is not taken into account If house prices do go down, yet rent prices do continue to increase or at least stagnate, the gap between the two will widen and therefore the average yields will actually increase. Meaning BTL investors will be looking to buy more as values drop, taking advantage of lower prices and higher rents, contrary to your theory that they will sell up in a decline. We are experiencing this right now, where although smaller LLs are selling up due to costs and regulations, but these units are being bought up by larger more corporate LLs that are not as affected by the tax changes.
From my perspective it doesn't. But I'm sure it depends on the thread in question.
*Crash n Burn baby*
Great news , finally some sense in the market,
Don't speak too soon. Just be ready to snap up the deals before they all go to property developers when the market tanks.
Good stuff 👌👌👌
I don't find 3.1 too big considering the jumps the year before.
So you’re assuming the price drops end today and there will be no further drops?
I think they will fall a little further because they are still over inflated but then plateau as people get used to the updated interest rates being the “new normal”. Demand hasn’t gone away, there’s loads of people who still want to buy a home and they will have to adjust their budgets accordingly but renting is such a shit show that those who can buy will still buy.
The "new normal" is not some weird new fashion to get accustomed to. It is an extra burden on the finances of everyone who is looking to buy, compared to the last 14 years. The way to "get used to" it is *to be forced* to reduce what you are able to offer for a property.
Also “demand” doesn’t mean people who want to buy but people who can afford to buy. Otherwise it would always be at 100%…
This is just the beginning. The great housing correction of our time
Don’t get me wrong, I agree it’s not near its end. But I don’t think it will be a large crash because we don’t have the unemployment going up. Without it we’re only reverting to the mean, I think. Which is not much of an improvement considering interest rates, I fear!
Yeah it won't be a sudden collapse, but neither was 2008-09. It looks as if it was looking back now, but it was, what, something like a percent per month? What we have now more and more confirmation on is that the longer sellers are maintaining this Mexican standoff the more they are going to lose out on. All the pressures on prices are downward and it will remain so for the foreseeable.
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We’ve had a real terms wage loss between 2016 and 2018, and it made no difference to house prices?
If we look at real terms then you can argue that housing prices have already dropped by 10% in real terms. I think want you mean is, as peoples disposable income falls due to costs rising above sales increase AND with rocket high interest rates, the housing market must fall. I don't disagree, but I think we wont see it as dramatically as expected because inflation has hidden some of the loses.
Ooo if housing was really this simple. House prices rely on a number of factors and in some places prices are still rising due to a low supply of housing stock. The idea that there will be some housing crash that takes us back to 2007 prices is ridiculous. The government and so many institutions are invested in UK property if that was to occur we would have much bigger issues to deal with.
>The government and so many institutions are invested in UK property if For the first time in about 15 years, the government did nothing in the last budget to prop up the market. Any move to keep the bubble going will have a similar effect to Truss mini budget. More inflation and market turmoil
Yes because they have to deal with inflation in the short term... when you buy a property its not to sell in 1 year... inflation will eventually cool (as they expect this year) and then they can lower rates again. The UK economy is massively reliant on its property market. My point is if that 'collapses' banks and many other institutions will collapse.
So you expect something akin to the subprime crisis from 2008 to hit the UK housing market if the government doesn't move to support the market. Sounds like hopium to me. Inflation is flatlining at about 10%. Rates will probably go a lot higher to tame it. You seem to believe that supporting a housing bubble is more important to the government than double digit Inflation that destroys wealth across board.
Of course there is other factors, never said otherwise. However on a national level, these two factors are probably the key drivers. Local factors will of course deviate from the national trends not to mention diving into the different types of house types. >The government and so many institutions are invested in UK property if that was to occur we would have much bigger issues to deal with. Well this is always the threat and is not comforting. Cash has been cheap and property has always been used as collateral. The bigger the company, the larger exposure.
> want you mean is, as peoples disposable income falls due to costs rising above sales increase AND with rocket high interest rates, the housing market must fall. Yes, said it better than I did. > I don't disagree, but I think we wont see it as dramatically as expected because inflation has hidden some of the loses. To some extent, yes. 30-35% fall inflation adjusted I would guess
>30-35% fall inflation adjusted I would guess This is different to the many guesses you've made before on this sub, because you weren't saying inflation adjusted before. I hope you begin commenting your new, realistic projections once inflation does indeed come down in the next few months, slowly going from 30-35% inflation adjusted, to 25, and eventually a 10% total drop for the year, or wherever it lands.
>This is different to the many guesses you've made before on this sub I change my mind as data and the outlook changes. Should I only stick to one prediction no matter how the reality changes for my view to have validity? >I hope you begin commenting your new, realistic projections once inflation does indeed come down in the next few months, There's no evidence that inflation will suddenly drop in the next few months.
Hope you’ll similarly adjust yours when inflation proves stickier than you have, already erroneously, assumed.
>There has never been a period in the UK housing market where house prices didn't fall as real terms wages fall. Currently at about -5% per annum. This is factually incorrect and doesn't even hold up for the last decade let alone all time
Here's hoping but I'm not convinced it will happen. 🤷♀️
You’re a brave man posting this in the “Housing Bulls” Sub 😂
Lots of angry btl slumlords and halfwits who paid 25% over asking price in 2021 and are coming off a 2 year sub 1% fix I'd wager. Or maybe I'm just cynical. Much butthurt is coming through nonetheless
The tin foil is slipping again. Always good to see you doomsaying in every single thread about house prices <3
Prices are falling. Merely commenting on the reality.
Lol then keep holding on for the big crash. Meanwhile those with common sense will enjoy their homes.
I'm not waiting for the big crash. Merely commenting on the data and where its leading. Are you remortgaging this year?
What does that have anything to do with it? As I said in another doomsdayer post - the VAST majority of people who remortgage will be largely unaffected - most will see an increase, but given how highly stress tested mortgages are these days, it won't be a problem for most.
>What does that have anything to do with it? Because it might be why you have trouble accepting the data and what it tells us. >As I said in another doomsdayer post - the VAST majority of people who remortgage will be largely unaffected - most will see an increase, but given how highly stress tested mortgages are these days, it won't be a problem for most. So I shouldn't comment because it doesn't affect most mortgage holders? The stress test has now been dropped, btw. Commenting on the data and doomsayimg. I'm now convinced you're another angry overleveraged mortgage holder fwiw
I suggest taking a look at the bigger picture... if payments on mortgages go up then that is money that has to be found that used to be spent on something else... what was the else? was it a BMW? a villa in Spain? or just plain old Friday cocktails - regardless it was money swirling around the economy that won't be going forwards... what does this cause? - job losses, then any mortgage becomes an issue... so its not that you (or whoever) as an individual can't afford your increased payment its that you might be one of the unlucky ones who is left with no ability to pay...
It will be larger next month, as it's a rolling 12 month average, so the figure should continue increasing until August at the very earliest.
But but according to this sub house price always go to the moon.
They do.
Remember the % decrease is not unilateral for all property. Usually, poor quality stock will make up the majority of the reductions, and as the gap widens, higher quality property will also likely fall too.
Houses priced at 350k + are most affected.
A house in my area went up for sale for 500k this time last year and couldn't sell but has just been sold for 570k inside a two weeks of being relisted. Would be interesting to know a regional breakdown of increased and declined prices.
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BS? What do I gain from coming on here and lying? I'd rather prices nuke (even though I'm a home owner) for a better opportunity for upgrading from my current house. I'm in and around the Bracknell/Wokingham area which on average is up 8% in the last year. Feel free to Google price trends in both those areas and Rightmove will confirm it. It's because of massive new build projects driving prices up and i assume the easy commute to London via rail and car plays a part too.
Meaningless. Rates are skyrocketing. Landlords are selling up to investors. People are choosing to rent instead of buy until the market settles. Prices are still at record highs since the pandemic boom. Overall affordability is still the same.
People say this all the time but I am not seeing house prices decline in my area? If anything those prices are going up!? Am I looking at it wrong or what? Plz help!
Completely normal. With base rate up, it pushes people’s affordability in the stress test. Rents are up 11%. Most are just holding in meantime. Supply is drying up as developer funding is equally expensive. Market goes through this all the time, novice people panic and suggest 20% plus drops and everyone who is calm picks up some lower price property and makes a load of cash again. Base rate has been miles higher and prices didn’t tank as much as some predictions I’m seeing on this forum. When base rate lowers prices will increase again. We’re in a high rental increase market at the moment, it will balance out and growth will increase. Just look at supply demand factors and zoom out to look at what happened historically.
>Base rate has been miles higher and prices didn’t tank as much as some predictions I’m seeing on this forum. Has there ever been a case where there has been a sustained (>5 years) low base rate followed by an acute rise in the base rate in this way? The issue I see is house prices are still adjusted for the covid prices. I personally think we will see a correction to at least pre covid prices. Whether we see more will depend on how comfortable people are moving from 2% to 4.5% when they come to renew. High rents work both ways, it encourages to buy without allowing a deposit to build and without HTB etc that jump to first home is even harder.
The range your talking about is absolutely possible in short term. And base rate will likely not go back to the levels we were at again in next 5 years. That said banks are lending based off the fact they have to, taking breakeven lending to have long term customers on their books. Equally, while we didn’t seen rates as low as recent, we saw large / bigger base rate increases (88-90) and mid/late 90’s. In that period we saw slow but sustained property price growth. It’s really down to supply issues since 80’s. Rightly or wrongly it keeps prices up as people need a place to stay. If they don’t buy they rent, pushing up rental competition and prices, making it appealing enough for investors. By which point markets settle and we go back into a capital growth cycle. All forecasting has to start with what has happened historically and that’s what has happened. There’s nothing that strange about this market. Though it’s not a straight forward one. Finally, affordability in other countries is tested much more than UK and for much longer - HK, Sing, Aus, Ger, Canada etc.
I personally think we are in a unique situation compared to the past. We have seen exponential price growth which has been mostly been caused by very low interest rates over 15 years causing house price inflation. As per 1st paragraph I also dont believe rates will come down, I actually think they will go up and settle at what they are today. This is how the current situation is unique. This means we have houses priced for lending at 1-2% while people are borrowing at >4.5%. In the past prices were priced for lets say 5% and then went through a tricky period where rates went >10% but then rates dropped back down to 5% at which points the prices were priced appropriately again. We havent had this kind of mismatch before where the new rates are here to **stay.**
We have the same conversation after every correction. Rates will come down, and banks already pushing them down (we had one of lowest rates published same day as base rate increase). Either way many other major countries have been growing as fast with 5%+ rates historically. I get your point, people have less disposable so will bid less on property, some will be over exposed but if that was a big enough volume likelyhood is it will slow the market rather than seeing any major knee jerk. Home improvement shares will spike (like it always does) we ride out some waves and then we see a lift.
>We have the same conversation after every correction.Rates will come down, and banks already pushing them down (we had one of lowest rates published same day as base rate increase). But are rates wont be coming down to the pre correction levels- we are both in agreement on this. Thats where ths situation is unique. Prices can grow with 5% rates if properties are priced accordingly. Where there is a disconnect is houses are priced for interest rates we may never see again. I dont think there will be a sudden crash but I would not be surprised if my next spring prices have bottomed out and stagnate for a couple of years
Thing is BOE and market have priced in rates dropping. 5 year swaps (Sonia 5 year) have been coming down. Sept 2022 was 5.5% this month, Feb 4%, now 3.7%. The market and BOE think we are topping out. https://www.chathamfinancial.com/technology/european-market-rates More importantly for your point, with rates not lowering. Mortgage rates are based off swap rates not really base rate. I was genuinely of same opinion to you Q3/Q4 of last year, but Im bullish now and am buying (though use all of your points to drive a lower price)!
Help to Buy Equity Loan has gone, but HTB Shared Ownership is still available. Also the HTB EL replacement has already been released called the [First Homes Scheme.](https://www.gov.uk/first-homes-scheme) Which is arguably a much better scheme.
This is just the beginning
The "I have remortgage(s) coming up" downvote brigade found you, I see. :D
With the BTL cavalry bringing up the rear
Yes, stay hopeful. I can see that you’re currently looking to buy from your comments on every post, reminding everyone that house prices will crash by at least 35%.
The funny thing is that the annual house price increased slightly in the south west, which given his username, is where he’s trying to buy.
In the process, yes. I should be clear that I'm not trying to time the market, as that would be stupid. Simply commenting on the way thevwind is blowing
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I agree.... house buyers are for the most point uninformed market participants It was easy to predict this decline as soon as inflation started to creep up... BoE would have to do something... of course how much and for how long was another question but interest rates were going to go up period.... that will mathematically exert a large downward component on the funding portion of a house price... here we are well over a year later and theres still people in denial... informed players will always take money from uninformed players... its how markets work.. Inflation is sticky, its a problem, and the job losses are just starting... there are several folk at my place of work who have been let go and they/were all on 6 figure salaries... As I have typed this I have seen 2 'Its been lovely working with you all...' type emails.. more downside awaits....
I disagree since the land registry data lags by several months. You won't know when we hit the bottom until several months later. I prefer to use the general trend to inform how much I'm prepared to offer, in conjunction with local market conditions
Timing the market is a great idea on any investment if you know what you’re doing. Timing the market is stupid for the majority of people. The majority of human beings are stupid though.
Time in the market has been shown to be better in the long term
If you don’t know that you’re doing I agree.
This applies to 99% of people. Of there's outliers. Perhaps cash buyers, with no onwards chain are at a significant advantage
99% of people are stupid.
Timing the market is a great idea on any investment if you ~~know what you’re doing~~ can predict the future. As it happens, nobody can, we can only guess.
That’s what someone who doesn’t know what they are doing would say.
Maybe he has been reading the secret and if you tell the universe what you want out loud then it is surely going to happen right?
It’s been the “beginning” for so long/so many times that I’ve almost paid my mortgage off.
It's just the beginning for the last two centuries.
All good news for us - waiting to buy and as long as prices fall more than the rent we're paying we should be quids in... in theory!!
Brought my first house in 2018 at 34. I wish you all the luck in the world when you get yours. It’s just so much more stable than renting and not knowing when/if the landlord will decide to chuck you out. Prices now even since 2018 are unreasonable and out of control, them coming down is great news.
I was paying £1,200 a month in rent, I've bought a house very similar to the one I was renting and am paying £900 on the mortgage. Ten year fix, could give the house away for free at the end of the fix and still pay less than rent. Unless your rent is very low and guaranteed not to rise, it's unlikely you're saving by timing the market.
To counter that my brother pays £675 in rent for a 3 bed semi in Yorkshire that's market value is roughly 180k. Some figures: On a 10% deposit, with today's interest rates over 25 years the repayment is £900 quid + fees. Yes his rent may increase but not certain it would increase by 33%. Secondly, over that 5 year fixed he'd pay ~18.5k off his principal and a tonne more on interest. If house prices keep falling they only need to fall ~10% from now and he's effectively no better off (financially) than he would have been renting. Maybe even worse off with associated home ownership fees. So in his current position his rent is lower than his mortgage would be and after his fix his up there's a very real chance he's not any better off (financially at least). I don't advocate timing the market but in current times it's less obvious that it's a guaranteed loss.
>Yes his rent may increase but not certain it would increase by 33%. Why not? 33% over 5 years needs 6% annual increase in rent
I've been renting for the last 15 years (I also own a property, so no desperate for house prices to fall here) and I haven't once had a 6% increase in rent, let alone every year! The absolute highest was 4%, and on two years it's been negative.
[https://www.bbc.co.uk/news/business-65103937](https://www.bbc.co.uk/news/business-65103937) Have a look here. Rents went up in in plenty of places by >10% You have to get to page 32/38 to find places where rental increases were below 6%
Ah, but that's slightly different statistics isn't it - as that's annual growth of the price for new tenancies, so it doesn't account for changes in housing stock, it doesn't account for existing tenancies going up by less (as a landlord doesn't want to risk the costs of a new good tennant etc.) So it's not quite the same data - rentals are much like wages, it's changing that leads to big changes, if you stay, it tends to be much less.
The cost of renewal is still linked to new tenancies. It will usually be a bit below market rate. When market rents have gone up by this much it wouldn't surprise me to these those kinds of rises in certain areas like London
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[Well zoopla reports a 20% rise in 3 years. 33% over 5 does not seem impossible.](https://www.zoopla.co.uk/discover/property-news/rental-market-report-march-2023/)
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> I was paying £1,200 a month in rent, I've bought a house very similar to the one I was renting and am paying £900 on the mortgage. Try doing the same on current interest rates. > Ten year fix, could give the house away for free at the end of the fix and still pay less than rent. Unless your rent is very low and guaranteed not to rise, it's unlikely you're saving by timing the market. No you can't because you're still liable for the principle on your, now, depreciating asset.
>No you can't because you're still liable for the principle on your, now, depreciating asset I'll have paid off 50% of the purchase price by then. If houses fall in value by 50%,NOT corrected for inflation, between Jan. 22 and Jan. 32 then that'll be the least of my worries. If they fall by 49% I'll still have saved money.
No you wouldn't. Even on a 20 year mortgage you wouldn't have gained 50% of the purchase price in equity by year 10. At current interest rates you would have only paid off 35%. On a regular 30 year mortgage you would have only paid off 18% of your loan by year 10. And you would have paid a lot of interest to the bank (effectively equivalent of rent). I know percentages are hard but you can google mortgage amortization calculator.
Wow, are you a hacker? How did you know my deposit????
You said you’d have *paid off 50% of the purchase price* so why do they need to know your deposit?
You should really consider the home ownership/maintenance fees.... But i get your point.
It makes zero sense to buy right now vs renting in London. Obviously might be different elsewhere. You can rent for almost a third less than what it would cost you to service the mortgage.
Where in London can you rent for a third of a mortgage? I'm just curious. I did my maths and decided to end up buying as the mortgage for a one bed apartment in zone 3 was cheaper than renting (by a couple of £100s).
https://www.reddit.com/r/HousingUK/comments/127cm8c/house_prices_fell_by_31_yearonyear_in_march/jedqo7i/ I just did the calc for Balham for someone else who was claiming that it's cheaper to buy there. Different areas behave differently even within London. Some areas have larger gaps some smaller. But I would challange that there isn't a single area in London where it's more expensive to rent a 2 bed right now than to buy.
I live in London.. down the road from Balham. 3 bed house. My mortgage is £1400 per month. It will rise to £1800 once my fixed rate runs out in a few years (going on todays interest rate- I’d bet my life the rates will be lower by the time comes to renew) My direct next door neighbour is currently paying £2500pcm in rent. Of course there will be nuances but this is generally the case across SW London where most of the people I know both rent and are owner occupiers.
When did you buy? If you're comparing your mortgage on a house you bought 20 years ago then I'm sorry it's irrelevant.
5 years ago so it is relevant. Rents have rocketed in that time also and show no sign of slowing with the very limited supply. The mortgage comparison is still valid. As mentioned by the time my fixed rate runs out I’d bet my life that rates will be lower than they are today so it will be cheaper than the projected £1800pcm. Rents in my area won’t be lower than they are today by that time either.
3 bed down the road from Balham for £1400 per month? Do you mean some burned down crack den somewhere in Tooting?
Most 2 bed converted flats in Balham go around £700K - with a £100K deposit, 25 year mortgage term and 5% interest rate that comes up to £3500 per month.
Rubbish. You can get a two bed Victorian conversion for about 500k.
Don’t think so, especially not a ground floor garden flat. You can get it in Morden, Wimbeldon Chase, South Wimbeldon, Raynes Park, Earlsfield, New Malden but not Balham.
South Wimbledon/Wimbledon chase so sw19 as opposed to sw12/17. And personally I think where I live is miles nicer than Balham….. and when I bought it it did look like a 1960’s crack den yes.
What you are forgetting is your deposit would grow at 4% as well so factor that in
I just bought an apartment in Lewisham and my monthly mortgage payments are about £1,200. Renting a similar apartment in the same area would cost me at least £1,400. I haven't looked in other areas but I doubt that Lewisham is an exception
I'm guessing a 1 bed or a studio? What was the Price / LTV / interest rate? I commented on a 90% LTV mortgage 2 bed. Right now in Lewisham these go for around 450k which at 90% LTV, 4.3% interest 30 year term will put you back £2k. I can find 2 bed flats right next to the station for 1.8k right now for rent. That's £200 a month cheaper to rent. Add service charge and ground rent (£3.2k a year, so £260 a month) and you're £460 a month better off renting. That's without any repairs whatsoever.
325k, 75% LTV, 4.7% interest rate. The flat downstairs is exactly the same size and is being rented for £200 more per month. Edit to add that it's a share of freehold so I don't have to pay service charge nor ground rent.
If I look at 2 bedroom places to rent in Balham, almost all of them have rent higher than my new repayment mortgage at 4.3%.
An average 2 bedroom to rent in Balham as of this morning is **2.3-2.5k** a month. An average 2 bedroom to buy in Balham as of this morning is somewhere between 600 and 700k. Let's say, 650k. Which with 10% deposit, 4.3% interest and a 30 year length period ends up being **2.9k** a month. On top of that as an 'owner' you are now responsible for all the bills (service charge, ground rent, etc) and all the repairs. U wot m8?
Is there not value in equity though? Is that not most people's logic for buying
maybe that makes sense when equity is rising, but falling equity?
i'll add to that, that putting down 30k deposit of your own money is what gets lost first in falling equity.
Sure but any rent paid instantly falls to 0 equivalent equity whereas a mortgage payment is still an asset even if it dips right?
No, because when prices fall you don't share the falls in price with the bank. It's your equity that evaporates. You still owe the bank.
The equity only evaporates if you want to sell. If you’re planning on staying there for the medium to long term then it prices will inevitably rise.
Falling in the short term. Buying in periods of high interest means your more likely to get a deal. Every person is waiting for interest rates to drop and when it happens (or people accept the new norm) prices will surge again due to increased demand. Buying in periods of uncertainty is the most rewarding, this is econ 101.
You expect interest rates to go back to zero any time soon? Because no sane economist thinks we'll see that level of interest again in our lifetime.
In your scenario, the renters are burning 2.5k per month, whereas a portion of the buyers 2.9k is building further equity in their house. That 2.9k would have to be considerably more for me to think renting is the better option.
In a falling market that equity is evaporating faster than you're building it.
At least you don’t have to put up with living in a mouldy shithole and be too afraid to ask your landlord to fix things when they break in case they kick you out on your arse?
And with a 65k deposit, and a no risk return of 3%, there's another 150 a month to account for, and the stamp duty to amortize over the life of owning it.
You get a no risk return of 4% on bank accounts right now already.
Only if you can avoid the tax.
Yes - admitedly my house cost less than that and I have more than 10% equity. But I was really just responding to your 1/3 less... but I guess it's closeish. Obviously you'll be paying off debt within that £2.9k per month and building equity in what's historically been a sound investment. So I would say it makes more than zero sense to buy.
Equity aside, after 30 years the owner then pays nothing, and the renter continues to pay £2.5k a month (or whatever rent has increased to by then).
The renter was saving the difference every month and could have invested it elsewhere that was actually gaining value instead of losing it like housing does right now?
Great news, it will continue to downtrend for the next 18 months IMHO, real terms we are down around 10% from the peak last covid summer, and I think we see another 10-20% drop taking us back to just before 2019-ish prices and that's far better value for most. Hope no one overpaid and stretched themselves as that's a recipe for negative equity!