If all houses fell by the same amount I wouldn’t mind a good drop. So long as I didn’t end up in negative equity it’s all relative beyond that point. Moving to a bigger house that’s 15% (or whatever %) more than the current one is fine.
And it might then open my smaller house to a first time buyer.
I’ve said it before, I’ll say it again; I understand why prices tanking would be bad for many. As a compromise, I’d be perfectly happy with prices being flat until they catch up with where the should be again.
Good: no-one goes in to negative equity.
Bad: people who treated housing like an investment don’t get a return.
I think that’s fair, no? What with an essential need (somewhere to live) being quite an inappropriate area for investment and growth in the first place, really.
He might he doing the radical thing of actually buying a home to live in it. Not an investment?
Lower prices mean the rest of us can actually enjoy home security.
Radical.
Me. I’d be fine with that.
It would cause problems which might need fixing, though.
It’s also just that prices don’t just crash in isolation.
For house prices to crash 50% one or more of a few things would need to happen:
If people are still in good jobs, earning the same money and able to borrow the same amount of money then prices won’t crash.
Some people want a ‘crash’ but actually no one really wants the conditions necessary for such a crash.
That’s £500 A MONTH folks.
Makes the energy crisis of last winter feel like losing a couple of £50s in a gust of wind.
A lot of people could have tightened their belts and found the extra for the energy prices without government help. Not many can suck up a £500 a month increase and keep living.
Indeed. It’s not like I can use my house less to make it cheaper.
Ours went up by £400 a month quite a while back when we renewed.
It’s not all is rosy on the property ladder. We’re also finding that the cost for trades people has increased significantly too (likely due to the rise of in cost of raw materials) yet they’re all fully booked up.
I feel like ive been banging this drum for a year now.
People are going to get a nasty shock when their fixed runs out unless these rates start coming back down.
Tracker mortgages already feeling the pain
Down to what?
The anomaly was the last 15 years. We’re now back to ‘normal’. Gens Y and Z better start sucking it up because cheap debt is over.
Baby Boomers endured a base rate in double digits for most of the eighties.
Back to 1%
The ratio of household income vs house prices was completely different decades ago.
If we had 15% rates today everyone would be totally ducked.
The 5% we see today is the equivalent situation to the peak back then.
If a house was three times my salary then 15% is tolerable. If the house is 10 times my salary then its max pain. People can’t magic up extra thousands a month by cutting Netflix subscriptions.
Not a chance that’s going to happen. If we’re lucky it’ll go down to 2-3% but I doubt it. More likely the “new normal” will be around 4-5% by all accounts.
The age of buying a house 3-4x times over your salary is definitely over.
People note that “well it was like this in the 1980s”
are forgetting the main difference.
Then, you could buy a house for, say, £34k and pay it off over 20 years, selling it for 3-4x that price.
Now you’ed be lucky to get a 6-8k uplift based on price trends.
Its the direction it needs to go.
We currently have a ticking time bomb far greater than the energy crisis.
Next year or two should hit most by then as their current deals finish.
Anyone who has a mortgage or renting should be flapping their arms about and making noise about it even if its not affecting them yet…
We were super lucky with rent, our landlord fixed just before rates went up, so they didn’t increase our rent (not sure how long the deal is for).
We pay very good money for what we get (3 bed 3 bath decent size new build, garage and big garden).
People always say this but 15 years is a little bit long to be considered an ‘anomaly’. It was more a reaction to the 2008 crash - the biggest crash since the 1930s after which interest rates were also kept low.
But I agree that cheap debt is likely over for a long period now. More than anything I feel like environmental issues are going to keep prices rising from here quite steadily - less available energy and resources plus the enormous cost of fixing our carbon output, and as a result low interest rates aren’t going to be an option. And as scarcity increases, global security will likely decrease.
Long term I think this might just be the start of some serious changes to lifestyle expectations in first world economies as the era of very cheap mass production and free global trade grinds to a halt.
It certainly does need to drop but having it artificially low for so long is what caused the beginnings of this in the first place.
I too hope it will go down but I’m sorry it’s just unrealistic for people (me included) to hope it will go back to that and everyone will Be fine.
We need to get used to the fact it will cost more to borrow, for a long time. I’m not saying I agree with it, just being pragmatic.
As it happens our mortgage renewal went through last month, it will be increasing by almost exactly £500 a month for the next five years.
Where that money will come from is next month’s problem. But quite a big one.
The we need to get used to it is the wrong mentality in my book.
When people who had £500 disposable each month start seeing that down to zero its not going to be swallowed.
When it starts costing more in mortgage, council, energy and savings disappear then its food thats cut.
Nobody then has money to spend and all the small businesses go under.
Downward spiral
But what’s the solution? It can’t just go down to 2%, that would increase inflation substantially. Then everything would be more expensive and they’d have the same problem, and people don’t really want to see their savings and pension funds turn to dust either.
I’m not disagreeing it’s a huge issue, but it’s also not really a solevable one.