Collapse of the UK housing market

[funduffer]

Schroders:

The average house in the UK currently costs around nine-times average earnings, based on data as at 30 November 2022. The last time house prices were this expensive relative to average earnings was in the year 1876, nearly 150 years ago.

https://www.schroders.com/en/insights/e ... in-the-uk/

Either prices have to fall or earnings have to rise (which they are) for housing to become more affordable.

Interesting report.

FD

[vand]

Schroders:

The average house in the UK currently costs around nine-times average earnings, based on data as at 30 November 2022. The last time house prices were this expensive relative to average earnings was in the year 1876, nearly 150 years ago.

https://www.schroders.com/en/insights/e ... in-the-uk/

Either prices have to fall or earnings have to rise (which they are) for housing to become more affordable.

Interesting report.

FD

or interest rates have to fall
or payment terms have to be increased

[Wuffle]

or,

the market doesn't have to fall.
Each time a parent helps a child to buy there is someone poorer who is excluded.
Get that to work really efficiently and there is no reason for property to go down much at all.

Antiques are a good example.
Once you have excluded all the poor people, even old crap nobody needs can be bounced along at a daft valuation.
So long as the vey wealthy keep selling it to each other now and again.

W.

[1nvest]

Schroders:

The average house in the UK currently costs around nine-times average earnings, based on data as at 30 November 2022. The last time house prices were this expensive relative to average earnings was in the year 1876, nearly 150 years ago.

https://www.schroders.com/en/insights/e ... in-the-uk/

Either prices have to fall or earnings have to rise (which they are) for housing to become more affordable.

Interesting report.

FD

or interest rates have to fall
or payment terms have to be increased

100 year mortgages and house prices could soar, nobody know nuttin.

[scrumpyjack]

https://www.estateagenttoday.co.uk/brea ... newsticker

More houses are owned outright with no mortgage than have a mortgage (36% vs 28%, the rest rented). A lot of buyers will have inherited capital so the impact of mortgage rates rising is diminished.

[Charlottesquare]

https://www.estateagenttoday.co.uk/breaking-news/2022/2/rising-mortgage-free-ownership-diminishes-interest-rate-impact?source=newsticker

More houses are owned outright with no mortgage than have a mortgage (36% vs 28%, the rest rented). A lot of buyers will have inherited capital so the impact of mortgage rates rising is diminished.

But what percentage of the rented ones have mortgages?

[Lootman]

https://www.estateagenttoday.co.uk/breaking-news/2022/2/rising-mortgage-free-ownership-diminishes-interest-rate-impact?source=newsticker

More houses are owned outright with no mortgage than have a mortgage (36% vs 28%, the rest rented). A lot of buyers will have inherited capital so the impact of mortgage rates rising is diminished.

But what percentage of the rented ones have mortgages?

Dunno but in some of the more affluent areas up to 50% of property purchases are all cash.

So how will rate increases impact valuations there?

[GoSeigen]

Schroders:

The average house in the UK currently costs around nine-times average earnings, based on data as at 30 November 2022. The last time house prices were this expensive relative to average earnings was in the year 1876, nearly 150 years ago.

https://www.schroders.com/en/insights/e ... in-the-uk/

Either prices have to fall or earnings have to rise (which they are) for housing to become more affordable.

Interesting report.

FD

Almost worthless article about affordability because, throughout, the word "average" is used with blissful disregard for the various ways the average could be calculated. The fact that the author seems unaware of the distinction makes me mistrust his entire article.

As for the false dichotomy, well indeed. Another overlooked option is that income [earning] and property ownership distributions become more uneven. See my comment in the previous paragraph.


GS

[1nvest]

Dunno but in some of the more affluent areas up to 50% of property purchases are all cash.

Cash purchases of Meth Labs and Hash Farms ... and during economic declines usually both of those markets expand.

[ADrunkenMarcus]

More affordable housing will be beneficial for society as a whole, IMHO.

[Lootman]

More affordable housing will be beneficial for society as a whole, IMHO.

Are you implying that the government should introduce policies specifically intended to reduce the net worth of home-owning voters?

[ADrunkenMarcus]

More affordable housing will be beneficial for society as a whole, IMHO.

Are you implying that the government should introduce policies specifically intended to reduce the net worth of home-owning voters?

That depends on whether they're seeking their vote.

There is, of course, a distinction between the politics and the economics.

Best wishes


Mark.

[vand]

I have always said that to have a real crash you not only need unfavourable financial headwinds that make the fundamentals unattractive, you also need real fear and panic sellers in the form of a spike in unemployment.

When people ask why aren't prices crashing this is what they are missing. The collapse will be in the number of transactions and the long slow adjustment over time required to bring them back to sensible levels.

[EthicsGradient]

An update on what's happening:

UK house prices rise as mortgage rate cuts lift confidence

UK house prices picked up in February from the previous month as recent reductions in mortgage rates helped to stabilise the market, according to the lender Halifax.

The average house price rose 1.1% to £285,476 last month compared with January, in a sign of resilience amid hopes the broader economic downturn will not be as severe as previously feared.

It followed a monthly gain in house prices of 0.2% in January and a fall of 1.3% in December, according to Halifax, which is part of Lloyds Banking Group. The annual growth rate remained at 2.1% for a third month.

“Recent reductions in mortgage rates, improving consumer confidence, and a continuing resilience in the labour market are arguably helping to stabilise prices following the falls seen in November and December,” Kim Kinnaird, the director of Halifax Mortgages, said.

House prices are down by about £8,500, or 2.9%, on the August peak but remain almost £9,000 above the average prices seen at the start of 2022 and are still above pre-pandemic levels, Kinnaird added. “With average house prices remaining high, housing affordability will continue to feel challenging for many buyers.”

https://www.theguardian.com/money/2023/ ... ts-halifax

[scrumpyjack]

According to Bloomberg's John Stepek, the latest Halifax figures contradict Nationwide's and show that house prices have been rebounding

https://www.bloomberg.com/news/newslett ... f=mwlrlP7l

It would not surprise me at all if the UK housing market once again defies the economic pundits and does not 'collapse'. There is a fundamental mismatch between supply and demand, and whilst higher mortgage rates make house buying even more difficult for many people, there will still be lots of people who will buy and people will continue to prioritise home ownership over virtually anything else.

I suspect, once again, the only thing that is going to collapse is the credibility of the pundits.

Anyway this is just a spectator sport for me, and many other fools I think?

[Lootman]

According to Bloomberg's John Stepek, the latest Halifax figures contradict Nationwide's and show that house prices have been rebounding

https://www.bloomberg.com/news/newslett ... f=mwlrlP7l

It would not surprise me at all if the UK housing market once again defies the economic pundits and does not 'collapse'. There is a fundamental mismatch between supply and demand, and whilst higher mortgage rates make house buying even more difficult for many people, there will still be lots of people who will buy and people will continue to prioritise home ownership over virtually anything else.

I suspect, once again, the only thing that is going to collapse is the credibility of the pundits.

Anyway this is just a spectator sport for me, and many other fools I think?

Yeah, and it is very much about location, as always. My youngest son has just sold his 4-BR London place, which was easy. And is now trying to buy a 5-BR home, which is proving hard. He has twice offered the asking price, only to be outbid by another buyer offering over asking.

So places like London, Surrey, Bristol and Devon are still buoyant, even if less affluent areas are depressed.

[makemakeolaf]

the collapse of the UK housing market is a complex issue that requires a multi-faceted approach. The only way to make housing more affordable is for either prices to fall or earnings to rise. Unfortunately, it is unlikely that prices will fall significantly, so the only way to make housing more affordable is for earnings to rise. This is already happening, but it is not enough to make housing more affordable for everyone.

[CliffEdge]

Not everyone can own their own house because there aren't enough houses for everyone to own one. Therefore whatever happens to prices, houses will not become more affordable - unless many new houses are built or many of the proles die.
Actually many old proles are scheduled to die but their replacements arrive across the channel every day.

[1nvest]

the collapse of the UK housing market is a complex issue that requires a multi-faceted approach. The only way to make housing more affordable is for either prices to fall or earnings to rise. Unfortunately, it is unlikely that prices will fall significantly, so the only way to make housing more affordable is for earnings to rise. This is already happening, but it is not enough to make housing more affordable for everyone.

Average house price 1990 £55K, mortgage rate 15%, yearly interest cost £8250
Average house prices 2022 £290K, mortgage rate 2.85%, yearly interest cost £8250

So in nominal terms recent mortgages were paying the same as in 1990.

Factor in inflation since 1990 = 2.264 multiple, and recent mortgage costs are less than half what they were in 1990 (8250 / 2.264 = £3644 comparable amount in real (after inflation) terms compared to 1990).

Sympathy for the 'hardship' of the youth of today from me is pretty low, as I was one of those who bought in 1990 and had to work every weekend and all of the overtime I could, and even had to rent out for periods ... to barely have enough to pay the mortgage, let alone have modern phones/techs/holidays etc.

[ursaminortaur]

Not everyone can own their own house because there aren't enough houses for everyone to own one. Therefore whatever happens to prices, houses will not become more affordable - unless many new houses are built or many of the proles die.
Actually many old proles are scheduled to die but their replacements arrive across the channel every day.

Of course there aren't enough houses for everyone to own as a single occupant. However there are enough rooms in those houses to more than accommodate everyone. Most houses are multi-bedroom but a fairly large percentage of those privately held houses have one or more spare bedrooms.
Landlords are undoubtedly more efficient in filling those rooms than your average family since a rented room provides additional income to the landlord.

With the combination of owner occupied housing and landlord owned rented properties we have managed to roughly keep the balance so that most people have a roof over their head rather than sleeping rough on the streets. We aren't back in the depression of the 1930s with shanty towns in city parks like the US Hoovervilles.

https://www.insider.com/new-york-central-park-hooverville-great-depression-photos-2020-9

In the early 1930s, New York City's Central Park was home to a small shanty town that residents experiencing homelessness built.

The ramshackle town was a "Hooverville," named after Republican President Herbert Hoover. Americans held him responsible for not doing enough to alleviate the Great Depression.

Hoovervilles appeared all over the US in the 1930s, some with as many as 15,000 residents. Despite their dilapidated condition, reports highlight how those living in them did their best to keep their homes tidy, and themselves presentable.

One man told a New York Times reporter in 1931: "We work hard to keep it clean, because that is important. I never lived like this before."