johnh009

Here is an interesting article for those of you returning to the UK, previously posted on the Canada forum. The are talking about a 40% drop in UK property prices:

http://www.moneyweek.com/file/22186/...lly-crash.html

sdunx

becomes a self fulfilling prophecy I'm afraid, talk it down it goes down (doesn't work so easily on women unfortunately - with the exception of Yank ones )

hudd

john009

We returned from Canada 2 years ago and now taking advantage of the current housing market in the UK. We are paying 25% less for a house through a private sale than what similar house have sold in the same area this year.
I watched a TV programme which talked about the 40% drop of appartments built in places like Leeds. The developers have built too many appartments and the buyers are not there and they are overpriced in many areas.

An appartment not suitable for families, where would my teenage sons play basket ball, put the trampoline or ride their petrol scotters etc? I need a decent size plot for my family lifestyle so I am buying a house on 1/4 acre plot.

There still demand four decent 3-5 bedroom detached houses which will fair better than appartments and small house in any price correction.

It not all bad news that house prices will drop. It happen in the early 1990's when we brought our first house and as a first time buyers we ended up with a managable mortgage.

hudd

Renie

They keep saying the prices are coming down, but when I look I still think they are quite expensive and haven't noticed any decrease, although MIL says people are prepared to knock quite a bit off asking price for a sale and saying that our house that we sold 3 years ago to come out here has just been put up on the market for the same price we sold it for.

qwerty007

What people are asking and what they are selling for are two different things in this market. The industry will be trying to keep things propped up and there'll be a lot of seller denial in the early stages. I wouldn't recommend buying now. Wait a couple of years at least and save yourself a bundle.

Viking Man

This sentence would be even more accurate if you replaced the words "industry" and "seller" with the word "government".

Pugsy

The larger actual price drops will be with the oversupplied city centre flats, particularly 1 or 2 beds. Fact is there's a shortage of family homes so the drops on those will be smaller and perhaps more dictated by the sellers circumstances that the overall market.

You can always actively search for a below market value house, put in a few silly offers, you never know. But when credit markets recover, in a year or two, people will be itching to buy again, so take care you do not wait too long.

Remember, this is nothing new, this happens every 10 -15 years. Only thing is we didn't have mass internet to blow the last housing crisis out of all proportion, but we do now!!

qwerty007

Sorry, I just don't buy this. You are right that this happens every decade or so. But property cycles are not like stocks. They don't have crashes, because of the illiquidity of real estate. The last one peaked in about 1987, and didn't bottom out until 1993. The one we have just seen, it a tsunami in comparison, and it's going to take a year or two before anyone knows its happening, let alone starts a recovery. You've got to take account of the fundamentals. Prices got completely out of whack with incomes. The UK has the highest level of debt per capita of any of the affected countries. There will be little fluctuations, or dead cat bounces occurring, but the general trend will be downward for some time to come. Many people seem unaware of the scale of the problem, and how far reaching it is. Prices have escalated beyond anything we have ever seen. Debt has been 'securitised' and so now affects stock markets, which affects economies, which affects housing, and so the spiral downward continues into recession. Lowering interest rates to stimulate the economy will take time to have effect, and has to battle with the downward pressure from a deflating housing market, that has only really started. I don't think we are headed for a depression, or even necessarily a severe recession, but a lesson is being learnt, and that is speculative investing will always chase assets while they are appreciating, until the fundamentals of supply and affordability become so overstretched that a bubbles occurs. I doubt people are going to invest to heavily in real estate after this. Much more likely, it that we will see a reversion to securities, most likely in tech stocks, as investors seek alternative strategies for pent up wealth.

Pugsy

And this opinion is directed AT me, is it?

qwerty007

Whoever wants to read it luvvy

Giantaxe

Well, you did intimate that the Internet was blowing this down cycle out of all proportion. I doubt that's the case. As qwerty eloquently explained, prices have lost any attachment to underlying fundamentals such as incomes, and that's the underlying cause of the problems. The difference the Internet has made, imo, is the availability of information about the housing market, meaning that people are less likely to be influenced by the crap fed them by used house salespeople.

Pugsy

God, some people are just so hostile. Perhaps I'm not eloquent enough to be allowed an opinion.

Internet is information isn't it, it's communication and also not only informed and professional opinion but idiot opinion too. Of course the internet and the media have blown it out of proportion, but come on, don't they everything? Yes, there's a real problem and it's more complex than just house prices, I don't deny that, but people will be buying homes again one day. Maybe they'll hold off a year or two, but there is enough of a population (in the abscence of mass unemployment) to weather the storm. Of that I am sure. I have lived in alot of countries around the world and know that many areas in the UK still offer very good value for money.

Giantaxe

I'm not being hostile; I'm disagreeing with your opinion.

I disagree. I think if anything the reverse has been true in that the media has helped blow the bubble in the first place. I've lost count of the number of real estate puff pieces over the last few years extolling the virtues of housing as an "investment". And too many media outlets, often those heavily reliant on real estate advertising, have been too slow in seeing the situation for what it is. Only belatedly have they jumped on the "it's a bubble" bandwagon.

Indeed. Once prices revert to historic norms versus incomes and rents, the market will undoubtedly recover.

ShozInOz

I agree with this. Flats will likely see a pretty big drop, especially city ones, as there are so many of them and they became very overpriced. Family homes are expensive but still undersupplied, and I imagine will drop up to 10% over the next 2 years. But, because people want to buy them, as soon as discounts reach that sort of level, people will jump back in to buy them so long as they can get a mortgage. People will not wait en masse for prices to drop significantly below that. Also employment is still high, as are population levels, and interest rates are fairly low.

A 40% crash in the property market overall is just not going to happen. Economists are nearly always wrong on these matters; their models have little predictive validity. Of course they will probably be right eventually - even a broken clock is right twice a day. But the major banks historically seem to have the best predictions.

Viking Man

They weren't exactly well prepared for the credit crunch weren't they?