Much shock in the press todat that the senior exec at Barclay's could say house prices could fall 30% top to bottom. As usual, those with a stake in the game are up in arms about this 'talking down' of the situation.
On the other hand, I am surprised that the pretence is still there that prices will remain so high. It is quite likely house prices will fall 50% (and this is for residents, if you wanted to buy a house in euro's or dollars then the price is alrady down over 50%). There are less mortgages, less jobs, less credit, there is less appetite for risk and less money on savings rates to allow people to build up a deposit; the outlook is bleak for the forseeable future.
Anecdotal information from Esate Agents say prices are already down 30% if you actually have to sell and this is before large numbers of foreclosures hit the market next year. Prices are after all what people want to pay, nto what people hope to sell for - a difficulty in doing polls on prices which has yet to be ironed out.
Even a 50% fall leaves prices at the top end of the long-run pricing index at 4.2x average salary.
When average the average house price gets closer to £100,000 than £200,000 will be the time to buy. Currently it stands at a 25% odd margin over this. Still much time to bide therefore...
21 comments:
Correctamundo.
Any rational observer would assume that average prices will fall by 40% or 50% from peak.
The way this was spun on BBC this morning, it sounded as if Barclays had said "prices will fall a further 30%", which seems about right to me.
I like the back-to measure - back to 2003? Back to 1997? Back to 1066? Back to 55BC?
As a rough check on where average house prices should bottom out:
Assume average salary £25K
Also assume banks are willing to lend max 3x salary of main earner plus 1x salary of partner on 80% of value. (I would go back to 2.5x and 0x that we had in the 70's, but that's probably too low for today's borrowers to stomach)
This means average house would cost around £125k when it bottoms out.
Of course this will vary across regions and taking a simple average across the country is only indicatve as averages of avaerages are notoriously misleading. It does show that you are correct inyour assertion that prices will be closer to £100k than £200k before the market stsrts to pick up and we see more transactions.
PS Also assumes no overshoot on the way down as well.
I spent some time looking in an estate agents window in Northumberland last Friday night whilst I stood outside the pub smoking my fag.
Asking prices already have fallen 30% from peak here.
1939, with no manufacturing base to speak of?
dearime - my current view..back to 1997. same for the ftse in 2009.
11 years of Labour, 27% real loss of purchasing power - no increase in actual asset values.
priceless. gulp.
GS - Yup, that was my exact calculation too!
Fuck.
I was hoping to sell my house in the new year. Should have done it last new year and gone abroad.
And how's the £ doing against the Euro?
:-/
This whole problem to my mind has been caused by estate agents writing their own pay checks.
They value the houses and obviously the more the hose sells for the more they earn.
It was bound to go tits up really.
P - I am in the same position.bugger. don't look at exchange rates, looks like a rollercoaster ride.
JPT - I think there are other issues, but you touch on a good one.
on the agency side, the BUYER should pay the fees, not the SELLER. this would help with your problem as the incentive would be to get a deal for the buyer not to shift the property for as much as the seller wants.
Or even both side pay half the agents fees which are fixed at marketing costs with a premium on top (say multiple of weeks to sell etc), then the agent incentivised to get a deal both sides are happy with!
One issue that this does not happen is that agents are by and large not clever types and want to settle for an easy number.
Looks like I did well to buy at the peak!
Never mind....
Me too BE. Nov 2007.
And I sold at top of 2005 too.
But as you know your house is your home, so as long as you can ride it out, don't need the value for your retirement, lose job etc it doesn't really matter.
(did you see how convincing that was!
I almost believed it myself}
I wanna buy a house with all the pounds I couldn't get out in time (you cannot imagine how much I hate the tax people and the anti-terrorist laws which are actually to stop the non institutional moving their cash about readily).. I want it in Bloomsbury. Guess where house prices are holding up magnificently.
Surely this isn't really that bad of a thing unless you're selling and intending to stay out?
For example 2 people sell their £140k house and move into a £280k house; if this were 2x£70 and £140, isn't the only impact less stamp duty etc?
Cheaper in absolute terms to move up the ladder...?
DR Ed. overall it is a good things house prices fall. Including myself, the people on here are more worried about their equity of lack of it in these circumstances!
You are right, Mr. Slicker, but you undermine your points a bit: "There are less mortgages, less jobs, less credit, there is less appetite for risk and less money..."
PLEASE!
Fewer mortgages, fewer jobs, less credit, ...
Schoolboy howlers grate, and suggest ignorance.
Actually since nobody sells a house except to buy another one, this is GOOD news for first-time buyers and if no interest to anyone else as long as they can afford their mortgage.
Just hang on tight, is all.
What's that? No business for Estate Agents? My heart bleeds.
Oh bother.
OF no interest.
Apologies all round.
Anon. Nice to see you hoist by your own petard.
I think First Time buyers are in worst place. They now have to have huge deposists or the banks won't touch them.
Rents are going up too; whereas at least those possessing a negative equity house might see their monthly repayments falling.
Hopefully it will fall 60%+ in total.
I say this because the sane model for house prices is surely 3.5 to 4 x average wage.
ie, average UK wage £25k,average houseprice should be £90-100k.
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