Housing Market Collapse

[Target Popper]

Our favourite long term investment, a home, yep rock solid lasts near on forever and importantly grows in value year on year.......well that's the theory?
However the recent changes where our leadership has decided we no longer need any countryside for food production, better we build lego cities all over the place which has now contributed to a paralyzed housing market and all home owners investments going downwards. Any views on this?

 

[BallisticBill]

Supply and demand dictate there can't be a collapse in prices. That doesn't mean there won't be a downturn but the market isn't overheated as has been the case before previous major re-adjustments. People need somewhere to live so the economy would have to tank, resulting in mass unemployment and killing demand. The slowdown in the property market is a reflection of the economic uncertainty, and those looking to move up a rung not wanting to take the risk.

I think first-time buyers who think waiting for prices to fall is a sensible strategy are misguided. They need to do their sums on deposits, mortgage interest rates and avoiding negative equity, but I can't envisage circumstances in which wages will increase faster than house prices for long.

 

[Bucket_of_Rats]

What Ballistic Bill said... with bells on.

There might be a slow down but there wont be a crash. There are too many people needing a home and not enough of them.

New Land lord rules will make it a bit more stable for renters, so perhaps that will help people not move about quite as much.. but rent will still rise and therefore deposits will take even longer to save

Interest rates might very slowly lower too.. and that will fuel house price rises.

 

[Nias]

I feel house price inflation only benefits the bankers and estate agents. Say you had a £1M house and a 100% mortgage and there was a crash and your house was only worth £10. You would still have your house and £1M mortgage. You then wanted to move up to a new house with double the bedrooms so you would need a £1M plus £20 morgage. If house prices had not crashed you would need £2M mortgage.

Your house worth £10 would only cost 20p in estate agent fees but would have cost £20000 before etc etc.

In the last crash I sold my old terraced house for £10000 less than I paid for it but bought a detached house for just a bit more.

 

[nobby]

New landlord rules will see casual landlords with one property to rent wanting to get out, that means either fewer landlords and bigger ones, or second homes coming onto the market, with the owners wanting to get shot of them. Not a good time for renters as the choice will be restricted, not a good time for owners in areas where ex-renting properties come to the market, maybe a short term opportunity for first time buyers to come in before the surplus is all taken up.

 

[Patrick]

Well we have a chronic housing situation that needs to be solved.
While i'm certainly not in the favour of unfettered housing developement we will have to build more houses but they must be in the right places not on flood plains, agricultural land, AONBs or important wildlife sites.
The simple fact is houses prices over the last few decades have let rip and has made buying and owning a home for alarge proportion of the public impossible especially first time buyers and those in everday occupations. Unless someone is in an exceptionally well paid job/profession or they get bequeathed a very large sum of money by someone in their will thy have little or no chance of ever buying a property.
The current situation may fine for those that bought a property many years ago i.e pre 2000 say but for current would be buyers it's a bloody disaster unless you happen to already own a property and want to move,trade up or downsize.
My own property is a classic example. It's a 2 bed terrace bought new in August 1987 and it cost me £34,950. If i was to sell it now the market price would be in the region of £200,000.
That's an increase of 600% but wages haven't increased by 600% since 1987.
For any first time buyer in this area that means to buy a small 2 bed starter home or similar they looking at least £200,000,to buy which means they're going to have about £20,000 minimum to get started.
And if they're already renting how are they going to manage that with rents as high as they are.
To make houses affordable house prices need to fall and perhaps substantially but that is unlikely to happenas it would leave many recent buyers with negative equity.
The only possible way round this might be for Councils to put compulsory purchases on suitable building land and with the help of government backing/funding build a lot more social housing that ordinary folk can afford to rent.
That's not likely to happen though as which ever Government is in power they're trying to make cut backs.
But while potential building land is sold to the highest bidder and house building is left to private developers and builders prices will remain unrealistically high.
This current situation may fine for us who already own a property seeing the value of our property soar over the last 30 years or so especially if anyone is thinking of downsizing where you could end up buying a place outright and have a nice lump sum in your bank account as well but it's no bloody help to any other would be potential buyers especially first timers.
There's little point in building houses that are out of the reach on many potential buyers but the housing market is its own worst enemy in as much has soon as affordable properties become available there's an increase in demand and prices inevitably increase, so we're back to where we were.
The enfasis at the moment needs to be on social housing rather than private developement.
After WW2 and well into the 1950s in many areas the were large house building projects funded by local councils in conjunction wit h government aid in the form of what was termed council estates
Where i used to live and was born, Maidenhead, there are 6 fairly large housing estates that are or were owned by the local council and built by their appointed contractor(s) and these were all built after WW2 and during the 50s and early 60s since then any developement has mainly been from the private sector. And this is the case in many prts of the country.

 

[Si_B]

Another issue is that whilst the Govt want to ‘build, build, build’ they don’t actually build houses that’s left to private companies who will only ever build what they can sell. They’ll actually only build what they can sell at a price they want to sell at. This means that despite what the Govt wants the builders will deliver at a rate that keeps prices up and will never flood the market to the point that supply outstrips demand.
Builders will also try to build on green field sites rather than brown field as it’s cheaper to start from scratch than have to clear land for redevelopment.

 

[Nias]

I totally agree I feel so sorry for the younger generation many will never be able to buy their own home and be left to rent and be evicted with a few weeks notice (hopefully the new bill will end that but I am sure dodgey landlords will find a way around it). I think many of the older generation do not realise how lucky we are.

 

[nobby]

Planners need to be more savvy and to attach conditions to consents such that work must commence within a much shorter period than they allow at the moment. And commencement must mean more than a trench filled with concrete. It suits many developers not to start building, just accrue the land with consent on it. Councils are obliged to authorise a set minimum of starts, if they fall short then consent pretty well must be given for new applications, if they don't get it then developers can go to appeal, win, and recover costs as well. Consents that have been started count towards the Council's allotted target, those that haven't, don't. So from the developer perspective, better not to kill the goose that lays the golden eggs. Just add the permission to the land bank and demand more.

That is why HMG hasn't a hope in hell of reaching these headline claims for new houses.

 

[Nias]

Under previous labour government there was money to build public housing but over the last 14years our debt has risen to nearly 100% so they have no choice but to rely on private developers with all the problems that come with it.

 

[Troy.T.]

This build, build build to address the housing issue because of a rapidly expanding population begs the question why is the population expanding so rapidly. I think we know the reason for that.

 

[Patrick]

While prices have rocketed where i am now it's by no means the most expensive area, it's not stockbroker belt country it's ist a small market town.
From 2000 to March 2004 i was working at the Vauxhall dealership in Windsor which is on the main road about half a mile from the town centre.
On the opposite side of the road was a row of terrace houses which were probably build between WW1 and WW2.
Originally they were probably 3 bed houses but i suspect the third bedrooms have been converted into bathrooms or have had an extension build on.
They had fairly large rear gardens, compared to most of today's houses anyway but with the front door you stepped straight out onto a fairl narrow pavement and i think there may have been no rear access.
During the time i was at the dealership one of these house came up for sale and the asking price was just over £200,000 and remember this was just over 20 years ago.

 

[BallisticBill]

The following chart shows how house prices, adjusted for inflation, have been fairly stable for the last 20 years. So the affordability has more to do with earnings and recent interest rates rather than prices per se.

Some other interesting points: previous major falls 1980-81, 1989-90, 2008-2009, have followed economic boom and overheated housing market followed by a bust, and increase in interest rates. There has been no recent economic boom and interest rates, although increased, have remained relatively low.

The big increase in real house prices came under a Labour government and correlates with population growth. House building remained relatively stable over this period (of second chart below) and subsequently.

​

 

[nikvanorton]

The proiblem with houses (that you live in) is that you can only fully cash in your investment if you die, or no longer need to live in a house. If you sell it to buy another house, that's gone up in value too.

 

[Nias]

Net immigration was nearly 1M last year and will be 430000 this year. The plus side of that is most are of working age so will be net contibuters to the economy until they retire. Schools are closing all over the place as the school age population is going down and will be a huge saving. Probably the biggest "problem" is us older generation who have increased by 11milion over a few years. We take up a lot of the housing and a large proportion of the health budget.

 

[pjgtech]

As above, there are still far too few houses, so supply and demand will dictate that there will not be a crash.
As long as there are not enough houses, then there will always be people willing to buy them.
There may well be an adjustment, and prices may well fluctuate and rise and fall, but its all relative.
Despite what every Govt says for the last 40 odd years, we have not built enough houses. Simple.

The whole system needs looking at, eg: planning laws, land banking by developers, Govt relying on private firms to build "affordable" houses, a redefinition of the term "Affordable" as it is not affordable to most, despite what the Govt says, etc, etc.

 

[TimD81]

let them build the cheap quality houses because they wont last, any government funded houses will be built on a very short shoestring , cheap labour to build and cheap quick materials used, building them isnt called house bashing for no reason.

 

[Bowland Blades]

Our favourite long term investment, a home, yep rock solid lasts near on forever and importantly grows in value year on year.......well that's the theory?
However the recent changes where our leadership has decided we no longer need any countryside for food production, better we build lego cities all over the place which has now contributed to a paralyzed housing market and all home owners investments going downwards. Any views on this?

Yep, Do be careful not to vote for the poor Government again !

 

[nobby]

It could be that new building methods need to be examined. The variable cost of house construction comes from factors such as the weather. Maybe prefabrication will help. Where I used to live in north Devon there was a concrete fabricator who made pre-stressed beams etc. He had a contract to make bathroom units for a big building near Canary Wharf, the old London docklands. These were concrete boxes about 2.4m cube, with pipework and furniture all plumbed in, shipped on trucks from north Devon to London, lifted into position by crane, and services hooked up. That was more cost effective than traditional on-site work. He made hundreds of these.

 

[Nias]

My daughter still lives in an ex council house. Built in 1948 just after the war. Couldn't be a worse time to build no materials and council funded. Still standing and going up as much as any other house. I was lucky enough to grow up in a council house people now won't be so lucky.