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DanShanks

House prices post Brexit fallout?

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I don't see why house prices should crash. Lot of scare-mongering in the press and by those who should know better. People will still move, buy a first home. All depends on what the purchaser does for a living, their income etc etc.

It's like all this scare mongering about food. Is Britain going to starve. Of course not. Some foodstuff may be in short supply but those are likely to be ones imported from Europe. Buy British. The French will probably resort to dumping their apples into mountains as they did back in the 1970s rather than sell at a low price as they expected to be subsidised by others. So be it. Macron can deal with that surely?

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Would love a crash to take place right about now.

Homes are for living in, they should never be an investment of a nest egg. The only people who want the price to increase are those who already own two or more.

This is the most socialist you will ever hear me being, but the first time buyer is totally screwed right now. Homes should be 3-4 times average salary, but 6-8 is closer to reality right now. That is outrageous.

I'm a believer in free markets but since we have no such thing due to government initiatives, we should limit each person in the country to owning only one residential property each. Also, it should be illegal to own property in this country if you spend more than 6 months a year living elsewhere. That would free up thousands of homes in London in particular, where entire blocks of new build apartments are bought by foreign investors who never even set foot in them.

 

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i take no notice of Mark Carney, he is a NWO propagandist. i think houses are too expensive in the UK and if there is a price correction down, that will be b/c they are too expensive and the demand side dries up at the current level. We do not look like there are going to be interest rate rises considering what the Federal Reserve said the other day - no more rate rises this year and one in 2020. What does not get discussed is there is a lot of inflation in the system which the governments manage to keep out of the headline data by their usual tinkering. Bond yields and deposit interest rates are in real terms quite negative.

This is John William's Shadow Stats data for the USA - i do not expect the UK is a long way from this. We can see how the official CPI is much lower than he has calculated - this difference is of course cumulative - if the official rates and real rates differ by 4% for 5 years that means price are over 20% out between the real world we live in and those living in the Bubble.

http://www.shadowstats.com/alternate_data/inflation-charts

Edited by sixgun

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The simple truth is that there are too many people in this country chasing too few properties; the laws of supply and demand mean that prices have risen, to an extent where relatively few people can afford the relatively few properties that are on the market (if you ask most estate agents in most parts of the country, you will hear them say that they do not have enough decent, correctly-priced properties to sell).

One of the factors that is causing this "shortage of supply" is that due to the uncertainty that Brexit is causing, many vendors are postponing their decision about putting their properties up for sale - and it is ironic that in some cases this quite possibly because there is such as small choice of properties available for them to buy as their next home!

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My long term view is that house house prices will get crushed in the next recession/economic crisis when unemployment spikes banks fearful of lending will raise their loan rates.

From there it will begin the climb back, but they'll struggle to get back to the real prices they are at now, as Britain will be a much changed country by then, the EU immigration that helped drive the last housing bull market will not be in effect. The London premium over the rest of the country will not be as great as it is today as the capital loses much of its appeal for both investors and people wanting to live there.

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I think there is very little chance of a house price crash, the worst may be a slight dip or a period of very low growth and some regional variation  but as above its supply vs demand. Looking at the official statistics from the ONS its seems very unlikely that supply will keep up with demand so possible the prices could rise further even. They say:

"In mid-2017, the population of the UK was an estimated 66 million – its largest ever."

"The UK population is projected to continue growing, reaching almost 73 million by 2041."

"Sustained UK growth results from births outnumbering deaths (by 148,000 in 2017) and immigration exceeding emigration (by 282,000 in 2017)."

And even if we do leave the EU, "net migration of non-EU nationals in the year to June 2018 was 248,000 - the highest total in 14 years." So roughly they need to build the housing stock equivalent to the city of Bristol every year.

Edited by blindedbythelight

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Immigration levels are not good for house prices - either 1. they continue as is and the UK eventually becomes a place that does not command high house prices, or 2. the population votes for someone who keeps their promises to stop it, and immigration no longer produces the same demand curve, as has happened elsewhere, for example Italy (anti-immigration policy has led to recession). 

Birth rates are a touchy subject after the newzealand shooting as it depends on who's birthrates you are talking about. If left to the western population without immigration, birth rates are not looking good for house prices. See Japan for a good comparison and case study. Immigration has masked a problem. You see it is not only house prices that will suffer from population stagnation, it will be the end of the entire system as ever increasing debt levels are only sustainable if population continues to increase. The entire system is built on perpetual growth, without it everything breaks down and perceived and promised wealth evaporates. Hence why our leaders want immigration and despite every promise to reduce it to the tens of thousands, it has remained in the hundreds of thousands.

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I think there will be a price correction but its a market that is always driven by supply and demand and as @blindedbythelight states the demand will continue to outstrip the supply. People will always need somewhere to live - the more restricted the supply the higher the demand - and price.

Some people will always be (want to be) buyers - some will always be renters. So i have to respectfully disagree with some of @StackerNoob‘s points - people who don’t wish to buy or can’t afford to, have a right to be able to rent somewhere they can still call a home, even if they don’t own it - and that’s where a landlord who may own multiple properties would come in.

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If we leave with no deal, there would be a fall in the economy and probably a recession, so i'd expect a house price correction. 10, 20, 35% who knows, its just models given assumptions and best/worst case report as people see fit. 

There would also be recession across EU as a consequence, so the likelihood of this is less than some deal being arranged. 

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I think deal no deal,stay or leave etc will make little difference in itself to the prices.

The one factor that could cause a crash or least a marked decrease would be if interest rates increased substantially, it's been historically low for a while now and is also a contributing factor to high house prices.

Granted that a rise could be a side effect of brexit stuff (among other things).

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i have lived through a number of boom and bust property cycles - sometimes houses sold the minute the board went up and at another time houses would sit on the market for months and years, the desperate owners cutting and cutting the prices.

The situation is ripe for a crash - the mortgage companies have fueled these rising prices by ramping up the multiples. i see 4.5x joint incomes with the Halifax or 5x the first income. When interest rates are low this is manageable or possibly manageable. i see on this website the average wage has fallen since 2012 https://www.icalculator.info/news/UK_average_earnings_2014.html

All we need to implode the property market are interest rates to go up. Mortgage companies will scale back multiples - owners will fall into arrears - forced sales appear and prices will tumble. Prices are set at the margin - the price of houses in the estate is set by the selling price of the half a dozen that have sold in the last few months.

If you believe prices cannot tumble hard then you have not been around the block enough times and seen enough carnage.

 

Edited by sixgun

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5 hours ago, AuricGoldfinger said:

 its a market that is always driven by supply and demand

This is true - this determines how many potential participants there are in the market -  what makes potential buyers into actual buyers is available credit and the quickest way to turn off demand is the cost and availability of credit. So what determines market activity is prices set against how much participants have to spend. You might demand a house but if you haven't got two ha'pennys to rub together you aren't going to get one.

If mortgage companies would lend at multiples of 1000 x joint incomes and interest rates were 0.0001% - house prices would be staggering. Participants could borrow £10's of millions - they might never pay off the loan but their estate can sell the house when they die. If mortgage interest rates ramp up and lending multiples are necessarily scaled back, then first time buyers cannot enter the market unless there is a big drop in prices. Thus the velocity of sales fall and so sellers start to drop prices and distressed sellers increase. Sentiment turns bearish on prices - offers on houses are dropped even when the potential buyer can afford the asking price. This creates a vicious cycle of falling prices until a new equilibrium is achieved - this could be 30% and more lower than today.

Edited by sixgun

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That is it I think. Cheap debt is the driver behind house prices. Ever increasing prices are supported by ever increasing nominal debt in real terms. As @StackerNoob said look at house prices in terms of wages and you can see that the ever increasing greater portion must have been debt, because it sure isn't wages. Why have wages not kept up? 

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@KDave i recall a recent Kaiser report video where Stacey (Max Kaiser's co-host) mentioned a Tweet put out by a member of the BoE who stated the BoE had carried out QE to boost asset [property] prices.

If government restricts planning consent, cuts back on public section housing projects [council houses], has open door immigration and sluices cheap credit into the property market through QE and low interest rates, you have a recipe for rapidly escalating property prices. You have the property boom we have seen - the high octane fuel that drives this engine is the cocktail of low interest rates and central banking QE. Push up interest rates and you cut of that fuel off and the housing market will stall.

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Huge shortfall in property numbers so unless all of a sudden thousands of new homes get built overnight I can’t see a 35% drop happening. I can’t see thousands of houses coming into the market over night on exit either.

A discretionary fund manager told me that if we stay in Europe interest rates will go up quicker than if we exited. If we exit they’d likely stay lower for longer to help the economy. Lower rates mean higher demand for mortgages and make buying more affordable. It depends on what the BOE do with interest rates upon exit really. 

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The ratio of average house prices to silver is very interesting last few hundred years.

 

It has averaged around 500oz of silver to one average property

 

In the late 1970s upto Jan 1st 1980 it went down to a few hundred ounce of silver to one house.

 

Today its tens of thousands of ounces to one average house.

 

Either silver is way undervalued, or property is way over valued.

 

Or both.

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As ever with Brexit predictions, nobody knows anything. No country has ever gone through this process, so no one has a clue what's actually going to happen.

As said in this thread already, the usual supply and demand arguments suggest this doesn't pass the taste test. They're slowing up now due to uncertainty. Once we get Brexit out of the way we'll be back to the usual skyrocketing prices, even with Chinese demand weakening.

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The EU is going down the toilet why would we not want to distance from the unsustainable debts. The question should be will the EU even survive, not if we should distance the uk from the fallout.

The issue now is how to cope with the looming house price crash and flood of repossessed properties.

HTB was quite good at keeping the bubble inflated. HTB stands for help to bubble.

Then help to bubble 2 was increased percentage of loan interest free for longer,

Now these interest free periods are coming to an end just when interest rates can’t be held down for much longer,

Help to bubble three needs to be 50% interest free loan for ten years available to low income families with 1% deposits. Then even poor credit will be abe to get loans just like GFC1. GFC2.0 will also give anybody a huge loan as long as they have a pulse.

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Prices are slowing falling in real terms.

https://moneyweek.com/504105/house-prices-are-sliding-fast-in-london-and-its-spreading/

 

"Prices in London fell by 3.8% year-on-year"

This shouldn't be a surprised if you see the amount of building going on around here... We are looking at a massive oversupply problem over the next decade.

Edited by vand

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5 hours ago, KDave said:

Stagnation in nominal terms or below inflation rises (real terms fall) is what I am expecting over the next many years. 

I agree as a "middle-to-best-case" scenario, but I would expect a 15-20% fall in the event of a recession.

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On 01/04/2019 at 09:29, vand said:

Prices are slowing falling in real terms.

https://moneyweek.com/504105/house-prices-are-sliding-fast-in-london-and-its-spreading/

 

"Prices in London fell by 3.8% year-on-year"

This shouldn't be a surprised if you see the amount of building going on around here... We are looking at a massive oversupply problem over the next decade.

Some say oversupply but still some say there are not enough new properties being built to support increasing population 

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