UK house prices about to fall over the cliff edge. Recession to follow ?

"Richard Faulkner" wrote

Those that rent when renting costs less than buying have the opportunity to stash the difference and pick off bargains from a chain-free position. Potentially worth vastly more.

Quite - you have drastically reduced your circumstances so you're getting less for the wedge you're spending on housing. I could move to one of those

10k terraces in Liverpool too, but to me a 'gain' is something that leaves me better off.

I'm taking just such a view. I assume that London will remain Europe's financial centre indefinitely, because there are no other candidates for the role, and because we speak English in this country. This will continue to draw in more and more yuppie foreigners, who will outbid the poorly-educated locals for attractive canalside flats in desirable areas 25 minutes from the City. I expect to keep the BTL until my daughter grows out of it in, oh, 30 years' time. I may well buy some more, but on present trends, not for about another 10 years.

The point is people are often willing to make sacrifices, eg no holiday etc, for a few years until perhaps mortgage payments drop by 30% in real terms, but not for a decade or more.

They didn't stay there for long did they? The government came out of the ERM, that lowered interest rates significantly.

And what do they see now? If they look back over 20 years they'll see interest rates over *triple* what they are now.

A lot of people didn't of course, and that's why so many struggled. But houses were much more affordable in the late 1980's with rates at around 10%.

An Estate Agent in SW London mentioned to me, just over a year ago, that BTL repossessions had started to increase in her area. Not sure if there has been any increase since then.

"Andy Pandy" wrote

They were over 15% for more than a year, Nov.1979 - Nov.1980. And again for a couple of months at end of 1981...

In message , curiosity writes

Not really sure what you mean?? As far as I am concerned, a market crash is more likely to have a positive effect for me. E.g. Demand for rented property, (and rents?), will increase, and it will cost less to buy more properties, if I choose to.

I am now merely a bystander, with significant long term experience of various booms and busts.

So heads you win, tails you win? Your not the first BTLer to harp on about a market bust (bargains galore!) being as good as boom refinancing, but unrestrained expansion of BTL portfolios can't possibly go unchecked without serious long-term repercussions. There are now vast armies of BTL spivs who would mop up the entire UK housing stock given the chance and if they're all cracking champagne to a rise OR a fall (and by extension neither!!) then you know there's trouble ahead.

Think it through - more ways to skin a cat than you can shake a stick at.

My guess is that a collapsing market will stifle credit - especially that based on your asset which has collapsed in price. But failing that this could very quickly become a political problem of horrendous proportions.

Incidentally, either you're suffering a total failure of the imagination, or you've got a helluva nerve complaining that....

"These days, "people" seem to think that 1st time single buyers seem to have a God given right to a 3 bed semi, wherever they want it, in tip top condition, with all mod. cons., and that it is not fair that they cant afford it"

... when you have been and apparently intend to continue to be at the very crux of the problem!

A bystander? Don't be silly.

There's been a stushie in Glasgow. It seems investemnt clubs and BTLers had put down 10% deposits on new build flats on a site there in order to flip them. They weren't selling, and the developer dropped the price of the remaining flats, putting the flippers underwater on their holdings, so they can't sell without a loss (rumours of 20% drop in the price by the developers) even if they can find a buyer. Now the developer has completed and wants the other 90% from the investors, which it seems most of them don't have. AIUI, it's all gone to Court with the investors claiming that the developer has somehow reneged on the deal by dropping its prices for new buyers.

I have the feeling we're going to see more of that sort of thing.

FoFP

I've heard this anecdotally too and may it continue in force - either the reputation of BTL needs to be damaged beyond near-future repair or it will become a social cancer.

There's plenty of study to indicate that people rarely act rationally when bidding with someone else's money, which is what buying a house with a mortgage seems to most people.

I note that my views on housing having now been adopted as mainstream, there's still scant thought being given to the idea that this is a credit bubble rather than a housing bubble, despite it looking more and more obvious in both statistics and behaviour.

The housing bubble is bursting. The credit bubble has not yet burst.

FoFP

Yep. The big assumption of many who#'d buy property at discount prices during the bust phase is that they'll be able to get a mortgage on reasonable terms. When the credit bubble bursts, essentially the only people who'll be able to borrow money are those who don't need to.

Having near 100% of the population able to borrow pretty much anything they like is *not* business as usual, it's an aberration which will sooner or later be reversed.

It'll probably see the Tories elected if that's what you mean.

FoFP

I don't know why so many people seem to "have it in" for BTLers. They seem to want to blam them for a problem they've only had a small part in creating. This has led to an oversupply and hence cheapening of rented accommodation, and hence people looking for somewhere to live are finding rented housing to be much more affordable than to buy. They should be *grateful*.

I think we should all be grateful to them for putting their finances between the country and harm.

FoFP

Because idiot BTLs have priced houses far out of the range of FTBs who would otherwise have bought rather than rented.

Sane, long-term BTLs are not the problem, since they only buy when rental yields will cover the mortgage... which means most probably stopped buying 2-3 years ago. It's the idiots who've been piling in in the last few years buying places which are so overpriced that they're having to massively subsidise their tenants (if they have any) which are the problem.

Mark

I suppose if it hadn't caught on it might not have earnt such a bad reputation but it did and on a grand scale and in the process it produced a band-wagonning effect and a voracious promotional machine as a sideline industry intent on getting as many as possible onto an ever-lengthening gravy train with the precise intention of winning more recruits ensuring more bidding resulting in higher prices ensuring more refinancing and looping back again.

I was looking at London prices since 2001 around the 300k-400k upwards mark and - at least in those areas that interested me - there has been nothing remotely like the increases I've noticed in the prices of typical 1st-time-buyer properties many of which seemed to have easily doubled or more. BTL has aimed at and pushed to one side the erstwhile FTB - not all of course, some FTBs have been prepared to pay through the nose (thanks to BTL) - but it is principally FTB territory that has been coveted by BTL and I think those inconsistent multiples show in sharp relief the distorting influence of BTL.

The price of oversupply in rental was undersupply in houses for sale - they're not independant variables.

Perhaps they should be *grateful* but they most certainly shouldn't be grateful.

Yes, and I think we could also see a resurgence of the public stocks not to mention the re-routing of EC excess soft throwing fruit and veg to a city centre near you. (...100,000..errr..No!...make that 200,000 silly hats and make sure the legend "Landlord" is on all of them..)

Nah. The folks who are bitten will whine like they've been sold an endowment mortgage and want their money back from the banks. They won't get it though because the first bank made tio hand it back will see everyone remove their savings from the bank, and that really would put everything into bad deflation.

When the shit hits the fan, all stops will be pulled out to save the banks, or at least the major ones, and the losers will be left to fend for themselves.

Of course they'll take revenge and elect the Tories, but given the effects on the rest of the economy, the government will have its hands full trying to keep the welfare state going, never mind bailing out speculators.

That's of course just until the government is faced with paying either the pensioners or the welfare claimants. At that point it'll be "find work or find a soup kitchen..." for the wefare folks.

Debt: it all seems like a fine party until the piper wants paid.

FoFP

I don't think it will have been entirely a deliberate targeting of that market, it's more likely that small-time investors didn't want to overstretch themselves and therefore went for what *they* could afford to buy.

On the other hand, I concede there will have been some targeting. After all, all things being equal, the people who prefer to rent tend to be those who are more mobile - childless singles and couples fed up with sharing larger properties, although the larger shared property market remains strong (students need somewhere to stay), but discourages landlords who are deterred by the tightening HMO rules. I imagine there has been a not inconsiderable exodus of even long-term landlords from the HMO market, which has led to a distortion in the buying market by flooding, in a small way, larger properties onto a market with not enough family buyers to snap them up, and no-one wanting to buy them for letting either because of the extra investment and hassle required to meet HMO standards.

There has also been a trend towards parents buying flats for their student children, supplementing the budget with rent from flatmates. These ventures, I guess, will also have been stifled by HMO rules.

Don't be silly. They should be grateful because the net cost of accommodation for them has come down, now it costs them less to rent than it would have to buy. Let them stick it out for a bit, save up, and they'll then be in a position to skip the FTB stage and move straight to the second rung on the ladder, on which the bigger houses are comparatively "less more expensive" than those on the first.

Don't be so arrogant. The mood as I see it - and please show me any evidence to the contrary - is they feel they have suffered a loss of choice. It costs less to rent now because it has become ridiculously expensive to buy. If you want gratitude go elsewhere.

I think I'll pin my hopes for them on a crash instead...

AIUI, it has been becoming ridiculously expensive to buy long before the BTL bandwagon started to roll.

If you want to lay blame for loss of choice, look instead at the ridiculously cheap availability of credit. Without that, the bandwagon wouldn't even exist, never mind be able to roll. There aren't many BTL investors who aren't mortgage-assisted.