House Sales 'May Fall By 40 Per Cent'

Razor

Member
Ooo Look a flying pig. Who would honestly sell their house for 40% less than its value today. Stupid articles like these have been going about since 1998.

IMO we might see a 10% correction in house prices followed by a flat period. Dont forget prices have risen by about 20% in the last 2 years so its not all that bad. Once property prices start to drop by a certain amount investors and first time buyers will have a field day and this will help the market no end. Also interest rates although not stupidly low like they were 5 years ago they are still low enough. If interest rates jump to 15% then yes you would get a massive drop in house prices, I really don't think the government will impose double figure mortgages.
 

CGizzi

Novice Member
I think that headline is scaremongering to be honest. Its my opinion Journalists/Editors are trying to sugest to casual readers that house prices will fall by 40%, when if fact the wont its the volume of sales that are going down not the price of the houses ( 5% drop in house prices I believe?)

Cheap trick using wording simalar to those people selling "ps3 box, used once" on ebay.

Edit:

Seems someone has already fell for the "trick of words" that the article has tried to do!
 
D

drac

Guest
I read this as the 'number' of house sales fall by 40% so if 100 sold this time last year, then only 60 will sell this year (only an example).....

you beat me to it!
 

kbfern

Distinguished Member
Yes annual sales in the number of houses sold to be 40% lower,poor old estate agents/mortgage advisors/surveyors/solicitors etc that depend on high prices & volume of housing sales.:D

Then theres the carpet salesmen/diy/ furniture shops all going to be struggling.And last of all the government,think of all the taxes house buying & selling generates in revenues for Her Majestys Customs & Excise.

You watch later on this year when they do the pre budget statement there will be no joy for us as they will be looking at more ways to screw us for more tax to make up the shortfall.:mad:
 

Razor

Member
I read this as the 'number' of house sales fall by 40% so if 100 sold this time last year, then only 60 will sell this year (only an example).....

you beat me to it!
:oops: my bad I miss read the article.
 

Member 6435

Well-known Member
Unfortunately the knock on effect of the fall in house sales is already starting to bite:(

A good friend of mine who worked at a solicitors heavily involved in conveyancing has just been made redundant.

Regards

Alastair:hiya:
 

gavan

Novice Member
We're already seeing a steady trickle of redundancies in the financial services sector. Not major amounts, but high earning jobs going. That trickle will increase steadily.

The first really visible redundancies will be in the trades and professions directly related to the 'building and selling houses' business. That's a surprisingly large amount of people, not just builders, joiners, estate agents etc. Don't forget removals companies, furniture sales, conveyancing solicitors, surveyors.

Then we get the retail sector hit as more and more people don't have the money to splash out on shopping for luxuries any more and others decide to reign in spending and pay down debt even if they are still doing OK.

Service industries could be badly affected at this stage too, especially businesses providing services that rely on discretionary spending (ie. luxury or convenience services) since they will be directly hit like the retail sector.

Then more general job losses as economic confidence collapses and companies decide to scale back across the board.

Which all feeds back into the loop........


Essentially, much of the prosperity of the last decade has been built on borrowing large amounts of money off of the back of the property market.

Lots of people who have been living the lifestyle of the well-off are going to find out that in fact, they are just heavily in debt.
 

hornydragon

Well-known Member
Unfortunately the knock on effect of the fall in house sales is already starting to bite:(

A good friend of mine who worked at a solicitors heavily involved in conveyancing has just been made redundant.

Regards

Alastair:hiya:

Tell them to brush up on "collections" and repossiens law. Its not the fall in sales that bites but the outlook of joe public and where he choses to spend or not spend his money....As mor epeople stick in the bank or other long term investments and sit on cash everyones cashflow suffers coupled with the high price of oil we could see some interesting times ahead (will the high oil price soften or worsen the blow?)
 

funkyspider

Well-known Member
On the positive side we may see estate agents having to work for their money.

It always astounds me when watching property ladder

"I value this property at 320,000"
"I value this property at 300,000"
"I would market this property at 390,000" - because I have a more expensive suit, wear reeeealy strong after shave, I'm called Nigel and have a better car.

How can there be so much difference in price. I bet the one that's way out feels a right tit when the program goes out :D
 

pjclark1

Novice Member
I've always gone with Nigel and added a bit.
They always sold.

House price really is a matter of opinion.
 

Sonic67

Banned
House prices won't really fall by any great amount. They may stay static. Suppose my mom died tomorrow and left me her house. I have it valued and I find out it's worth less than I believe it should be. I can either sell now and lose out on thousands or I can let it out until the market picks up and then sell it. If I was desperate for the money it would be different but I'm not. There may be some people who are looking for the money instantly but if people are thinking houses are going to be going cheap anytime soon it won't happen.
 

gavan

Novice Member
House prices won't really fall by any great amount. They may stay static. Suppose my mom died tomorrow and left me her house. I have it valued and I find out it's worth less than I believe it should be. I can either sell now and lose out on thousands or I can let it out until the market picks up and then sell it. If I was desperate for the money it would be different but I'm not. There may be some people who are looking for the money instantly but if people are thinking houses are going to be going cheap anytime soon it won't happen.

So people in general are going to decide to not move house and entrench themselves?

Were people moving house for fun before now, then?

There will always be a residual house market regardless of which way prices are going. People have to sell for a variety of reasons.

I'd guess that rather more people will be finding themselves wanting to buy/sell than will find themselves landed with a windfall property that they can just sit on until the market suits them, as in your example.

ie. There are an awful lot of properties out there bought foolishly as 'investments' in the last couple of years, that will be finding their way onto the market as a matter of necessity. That will provide plenty of inventory for those who want/have to move house.

Then there's the fact that a lot of people will still have equity in their house even at lower prices and want to buy a better house. With lower prices, the better house becomes more affordable relative to their own property.


Anyone sitting on a property in the hope that prices are going to return to their crazy peaks of last Sept/Oct anytime soon is going to be pretty disappointed. Not to mention out of pocket if they can't let it out for more than any outstanding mortgage plus costs.
 

Dextur

Distinguished Member
I suspect we will see a correction in the market over the next 24 months but I doubt very much it will be anything more than 10% or so depending on your area.

I also doubt that this drop will last more than 24 months, it's supply and demand, there's an ever growing population, projected house building isn't even coming close to accounting for the natural expansion of the population.

There will be plenty of people who won't want to sell in a declining market and so therefore less properties available, this may be offset to some degree by a deluge of the BTL properties from those who invested without really being able to cope with a small shift or who simply didn't think long term.

Most savvy multi property owners will be fine, they have their rentals coming, interest rates arn't liable to go up, folks can't afford deposits to buy so rental will still be a driven market, not a huge issue.

My bet is we will see a correction of 10%-15% depending on region, that will have blown over once this so called recession is old news which I suspect will be in a couple of years max, most folks will just sit tight pay their mortgage , and stop thinking about it.

We don't have dire interest rates or huge unemployement of the past, the cycle doesn't seem ripe for a full scale financial meltdown , yes things may well get worse for a while, but I don't see this as a big negative equity nightmare of the past.
 

hornydragon

Well-known Member
I have it valued and I find out it's worth less than I believe it should be. I can either sell now and lose out on thousands or I can let it out until the market picks up and then sell it.
If you can afford to pay the TAX.
Most savvy multi property owners will be fine, they have their rentals coming, interest rates arn't liable to up, folks can't afford deposits to buy so rental will still be a driven market, not a huge issue.
Indeed the professional porperty investor has pulled back on investment in the last 5 years as they have seen prices exceed the returns I have seen large amounts of ong term property assets sold recently by clever longterm investors who took the capital out while the going was good unloading troublesome and lowerer perfroming property they will buy them back once the prices settle (possibly even the same property from the eager BTL who got burnt, alot of people jumped to BTL for the wrong reason I spoe to anestate agent friend of my mums when i was first looking to buy and he had stopped buying (regularly picked up cheap property at auction etc) and he couldnt see the returns he wanted so didnt buy I recon he will have a feild day in the next few years there are already reports of massive reductions on repossed or forced to sell property, as long as you can py the mortgage I hope we will be fine..........(well thats what i amhoping.....we bought a property we knew we could afford not one that the bank told us we could borrow against, and shunned higher spec properties in lesser locations instead buying a smaller property in what we think is a great location just hope it pays off as we plan to be looking at moving in anohter 2-3 years.
 

gavan

Novice Member
erty owners will be fine, they have their rentals coming, interest rates arn't liable to up, folks can't afford deposits to buy so rental will still be a driven market, not a huge issue.

My bet is we will see a correct of 10%-15% depending on region that will have blown over once this so called recession is old news which I suspect will be in a couple of years max, most folks will just sit tight pay their mortgage , and stop thinking about it.
Yes - the smart property owners certainly will be OK. The real issue is what the tens or hundreds of thousands of fools who bought into an overpriced market and those who can't manage their loan repayments once the fixed rate 2-year 'teaser' is up, do.

We're already seeing prices down considerably since last September/October when the market turned and the full effects of the credit crunch on mortgage availability have yet to hit the figures, so predicting an overall downturn of 10-15% is optimistic in the extreme.


House prices went to way in excess of their fair market value due to free and easy credit available to buyers and a speculative bubble that saw the entire media obsessed with property (just count all the property porn shows on the telly and acres of newspaper supplements).

When you take away the support of easily borrowed money and the myth that prices are set to rise forever, the market is set to fall considerably. And there's so much business dependant on the cash this market generates that a recession following in the wake of the falling market is inevitable. Just as in the late 80s/early 90s.
 

pragmatic

Distinguished Member
50% fall I say ... but it'll take a while, although inflation might make any loss look less huge.

A long one, skip to the end if you can only be bothered to read 1 more paragraph.

FTB? well you'll need a mortgage first and now that the 100%+ ones have gone gonna need people with savings, something that is sorely lacking in the current culture of Britain, what the national non secured debt at the mo 1.7tri so a fair whack per person. Then banks will only lend if you have a spotless record, so the large numbers of people who could just snap up a mortgage strait away has been slashed. Never mind dodgy mortgages where people lied about their incomes.

Then we have the so called average house price as 7x salary, banks will only and historically have only lent at 3.5x salary (4 maybe 4.5x at a push for a couple). Now mortgage based equities/bonds have gone and probably for good as no investor is gonna touch them, banks will have to lend from what they have available in their vaults (especially as banks are not lending to each other) i.e. savings and current accounts, and as its their money (well ours but theirs to play with) on the line rather than some investor elsewhere they are extra careful.

FTB psychology will appear, where when prices where only rising they feel the need to buy or otherwise risk missing out and fear having to rent or live at home for the rest of their lives. This will reverse when prices are falling they will want to see how far it will fall, some will fall in love with a house on the way down but many will be happy to ride it out, especially those singles or couples without kids that don't have outside pressures a family might.

So to be a first time buyer you'll need a 3.5x salary and a multi k deposit + no other large loans and a spotless credit record. Houses will have to come down to that mark as that's all people can ‘afford', plus that deposit has to spring from somewhere. Otherwise a bank will have to be willing to lend a higher multiplier, maybe 7x and maybe without a deposit, but it'll probably be for a 30 or 40 or 50 year term, not many people in their right mind are going to do that. The mortgage is the affordability and is the ‘fundamentals' to the FTB market.

Investors, well the BTL speculator (i.e. amateur BTL'er) have been the same crowd that bought Timeshares in the past, and buy to lets will generally spoke in the same sentence as those in a few years time. There are those 20 odd year old property tycoons that have made a mint on buy to let, but they will have used the equity of all the properties to buy more and more (and fund their lifestyle with MEW too) , they'll fall like a house of cards, loads of houses/flats at auction all at once.

The professional buy to letters will come back and snap up a few bargains, but the professionals have stayed away for a good while recognising a housing bubble when they see one. They'll not buy up entire blocks of flats from those speculators that have bought tiny off plan city centre flats, no one wants to rent and certainly no one wants to buy at the current prices as a ‘home'.

Many BTL'er have a margin call, in their contracts they must keep a loan to value ratio of 85% or there abouts, if prices fall too much and they go into enough negative equity they will need to pay the bank the difference, and the further things fall the more the bank will ask for. People who bought very recently will very likely already at or in negative equity territory and if the rent doesn't cover the bills and they don't have a tenant, if I were in there position I'd be tempted to A)ride it out or B)sell up now at a loss and put it all down as a life experience.
As more people do B, prices of new build flats and other speculative properties will fall meaning banks asking for more money (margin call) and those who choose A will eventually be at B. Those with more than 1 BTL will just have the problem compounded unless they have cash lying around, but many will have invested everything and taken any extra equity out of rising house prices from previous BTL's to buy more. House of cards in new builds, its gonna crumble and those will be the ones that will be bargains, except for the need to knock 2 or 3 together to get a decent living space.

As BTL starts to see like a big con to people no one is going to go near, although most the ones that would buy more will be going broke in the process as they have over extended/'leveraged' themselves. BTL will be a distant memory and a nightmare of a one for many.

As the recession hits and jobs go things will only get worse and distressed sellers will appear. Banks are taking a pasting now with jobs going already (and were only a few months in to the credit crunch) and retail will be in a few months time (currys/pc world have already announced lots of store closures) and construction too, with housing industry already come to a stand still. This will and sadly make genuine families loose their house and their security, they and they alone will be the victims in this.

Any one else, BTL speculators, people who have MEW'ed (taken equity out of their house thus any mortgage they may have paid off is not only wiped out but a greater debt added) to live a lifestyle beyond their means and estate agents (who have been instrumental at pushing up prices taking a bigger chunk of money for no apparent extra work) will have little pity from most.

The mortgage and credit bonanza is over, things will return to normal lending where people buy things within their means and lend at a sensible level.


For Mr Inherits a house from a family member above, should realise that he might have to pay 40% on that house from his own pocket in inheritance tax, if he doesn't have the money he will have to sell it. The government will want the money now, can you wait months to sell if you are short of say 10k never mind 100k?

As for renting for either the BTL'er or inheritant, well city centres seem to be awash with flats and an awful lot of ‘to let' signs everywhere, although some of those have changed to ‘for sale'. The competition in the letting market, at least where I am has never been greater and stuff is hanging around for many months and more stuff is coming on. The same can be said about the market for house for sale, in general nothing is selling and more and more properties are appearing week on week, and this is just on right move, never mind all those estate agents that don't use it.

That's my assessment of the whole situation, based on that the fundamentals of the current house prices, that are based on 7x salary, speculation and fear/hype. Wiped up by: lax lending and easy credit, greed and easy credit, the media respectfully. All those fundamentals have now gone and things will /have start(ed) moving in reverse.
 

pragmatic

Distinguished Member
I also doubt that this drop will last more than 24 months, it's supply and demand, there's an ever growing population, projected house building isn't even coming close to accounting for the natural expansion of the population.
This is a myth on a number of fronts I’d like to dismiss, firstly the uk population is stagnant except for economic migrants, as a recession is coming they will go elsewhere, there is no natural expansion of the uk population only immigration increases the uk population ... There are currently an estimates 1million unoccupied properties throughout the uk, if supply and demand where so high wouldn't this be a much smaller number?

There will be plenty of people who won't want to sell in a declining market and so therefore less properties available, this may be offset to some degree by a deluge of the BTL properties from those who invested without really being able to cope with a small shift or who simply didn't think long term.

Most savvy multi property owners will be fine, they have their rentals coming, interest rates arn't liable to go up, folks can't afford deposits to buy so rental will still be a driven market, not a huge issue.
Interest rates haven’t had anything to do with it since the credit crunch hit, the bank of England can't set interest rates that effect loans or mortgages anymore as LIBOR the rate banks charge each other is higher and that why when BOE interest rates went down the price of many mortgages miraculously went up. You also assume that banks won't just profiteer. Plenty of people won't sell, plenty of people will be in so much debt they have no option, but this is the way with bubbles.

My bet is we will see a correction of 10%-15% depending on region, that will have blown over once this so called recession is old news which I suspect will be in a couple of years max, most folks will just sit tight pay their mortgage , and stop thinking about it.

We don't have dire interest rates or huge unemployment of the past, the cycle doesn't seem ripe for a full scale financial meltdown , yes things may well get worse for a while, but I don't see this as a big negative equity nightmare of the past.

As above interest rates are not set by BOE so its potentially worse as something oversees could sent a shock pushing them up, regardless inflation of stuff like food and fuel is as great an effect as interest rates were on mortgages last time. Unemployment has started and we have a few million on incapacity benefit ... unemployment by another name?

This might sound like the harbinger of doom, but unless we somehow see the return of cheap credit or a nullifying of personal debt things are going to get rough. I'd recommend fixing the price of your utilities if you can for starters and maybe take out insurance on your mortgage/loans if you have a risky job, if it’s affordable.
 

la gran siete

Distinguished Member
its taking the meaning of doom and gloom to new levels that is. Whats it to be next ,civil war?

Need to calm down a bit me thinks,Its all speculation nothing more
 

CGizzi

Novice Member
Personally Im lucky as I have a small mortgage & want to upgrade to a larger house fairly soon.


Say my house is worth £150k & £100k equity & £50k mortgage
THe house I want to buy is £200k therefore I need £100k mortgage ( £100k equity+£100k morg=£200k)

If house prices come down lets say 10% for ease
My house £135k = £85k equity + £50k morg
New house £180k = £85k equity + £95k morg

I will be better off with a smaller loan repayments, in this model obviously Im taking all other costs out of the equation but on simple terms a house price drop isnt definatly bad for everyone, plus as there will be effectivly less people buying Im probably going to be in a better position as Im the guy holding the cash.
 

Dextur

Distinguished Member
This is a myth on a number of fronts I'd like to dismiss, firstly the uk population is stagnant except for economic migrants, as a recession is coming they will go elsewhere, there is no natural expansion of the uk population only immigration increases the uk population ... There are currently an estimates 1million unoccupied properties throughout the uk, if supply and demand where so high wouldn't this be a much smaller number?
I can't verify your 1 million figure but seeing as folks are desperate for housing I can only presume they are in less than livable condition both from the private sector and for Government perspective. Or in areas with no jobs and therefore no ability to pay the mortgage and so forth. Can you show me the data on this, I was unable to Google anything quickly. I find it hard to believe that there are 1 million perfectly suitable houses all sat empty and nobody is interested in buying them even on the cheap.

If the house to population quota is not an issue why is there such an outcry that the projected house building won't come close to dealing with the requirements over the next 10 years?

The UK does not seem to have a stagnant population, where do you get that from, please provide dat to support this . I agree we are not increasing massively in terms of everybody having 10 kids but calling it stangnant is misleading, it is going up, that is not stagnant, however you want to swing it, increase in births, migration, decrease in deaths, natural growth and so forth. see:

http://www.statistics.gov.uk/cci/nugget.asp?ID=6

8% since 71, growth Increasing year on year. With over 50% of that having no relation to migrant workers.

That migrants will go elsewhere in a "recession" is purely a guess, shouldn't be stated as fact, a recession in the UK is liable to still be more appealing than £1 an hour or less elsewhere and that's if we do indeed enter a full recession. Infact some argue that if things really do hit the fan, cheap workers will be in even more demand.

The population is growing older and older, people need houses for much longer, there is an increase in birth a decrease in deaths, it is responsible for at least 50% of the total UK population growth.

According to this site which may well have a bias but comes up 3rd in Google for population growth we are far from stagnant.

http://www.optimumpopulation.org/opt.more.ukpoptable.html

Interest rates haven't had anything to do with it since the credit crunch hit, the bank of England can't set interest rates that effect loans or mortgages anymore as LIBOR the rate banks charge each other is higher and that why when BOE interest rates went down the price of many mortgages miraculously went up. You also assume that banks won't just profiteer. Plenty of people won't sell, plenty of people will be in so much debt they have no option, but this is the way with bubbles.
I didn't say interest rates did have anything to do with it since the crunch ? I said they are unlikely to go up to any degree which was one of the major issues that surrounded our last crisis. I didnt' assume anything about profiteering, your making the assumptions on that point, not I.


As above interest rates are not set by BOE so its potentially worse as something oversees could sent a shock pushing them up, regardless inflation of stuff like food and fuel is as great an effect as interest rates were on mortgages last time. Unemployment has started and we have a few million on incapacity benefit ... unemployment by another name?
Something ? Unemployment has always been with us, so has benefits, the point I was making was it is nothing like the bad old days, which created a situation ripe for a real recession. While the BOE does not set the rate , to suggest it has no impact is pushing it. If the BOE set the rate at 1% tommorow, banks would not put their prices up to 10% ... Agreed, the control mechanism isn't what it was but it does have the ability to guide the rates. The reason many banks didn't take into account the recent small shift downwards is they were all covering their backs and the fact their low borrowing rates had dried up from other banks.

This might sound like the harbinger of doom, but unless we somehow see the return of cheap credit or a nullifying of personal debt things are going to get rough. I'd recommend fixing the price of your utilities if you can for starters and maybe take out insurance on your mortgage/loans if you have a risky job, if it's affordable.
I've listened for the almost the last 10 years to people constantly stating how the housing market is going to crash, how the price increases are not sustainable , how it can't go on, etc etc and yet it did.

I'll buy into the issue that certainly things are looking bleaker now, but I don't think it's anything like as bad as you make out, of course we won't know until it either does hit us or it doesn't but right now whichever side of the fence you sit on it's nothing but considered opinion and shouldn't be stated as direct fact IMO.
 

funkyspider

Well-known Member
I'm having some building work done at the moment.

My builders say that all this 'credit crunch' and housing market talk is great news for them because more people are improving their existing home rather than moving.

They have been doing a lot of quotes for people who want to make more of their property through loft conversions, extensions and general building work than they were doing a couple of years ago where most of their work was changes to newly bought properties. He says that he's certainly not seen any slow down in money being spent, just that it's being spent differently.
 

CGizzi

Novice Member
My builders say that all this 'credit crunch' and housing market talk is great news for them because more people are improving their existing home rather than moving.

QUOTE]

Ive found the same, a lot of my friends/family are in the building game.

I also find it a rather odd when people are going on about estate agents/solicitors/whoever getting made redundant due to nobody buying houses.... well bad luck Im afraid! if the individual doesnt want to spend their hard earnt cash on a house why should they move "just to save someone elses job!"

Id imagine people are upgrading cars & other expensive household items kitchens/bathrooms etc also rather than moving.
 

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