The Lemon Fool

Tedx wrote:There was probably some resistance to tens of thousands of desperately poor & unskilled people living in sub standard housing with little medication or sanitation looking to emigrate and catch a free ride on a prosperous society.
Said India.

You've never been to India then Tedx? Or you might have smelt what real poverty is like. And realise how much the term is abused in the UK.

Gryff

Hi

I've not posted for a while, but anyway back to housing. I still think we're in a standoff at the moment. Lots of houses coming onto the market, but few forced sellers. In my local area the housing stock I watch (3bed +) reached a record level of unsold properties but have gradually come down. I have noticed classic EA tactics of houses being removed and then re-added at a later date. We've had a lot of people from Hong Kong move into the area and this has underpinned the market, but is starting to wear off.

The biggest shock to the market will be people refinancing fixed rate loans. Roughly 1.2m in the next year (me included) will coming off their fixed rates and have their mortgages going from 1%-2% to 4% - 6%+. This will hold back affordability on mortgages. I can see this becoming such a big issue (already lots of people moaning in the press) that I expect the boe will do some backhand FLS deal. Print a load of money and lend to the banks.

Bizarrely with baserates at 4% some banks are lending 5 year fixes at 3.75%. But I'd be surprised if a lot of money is available.

Go going forward I think the standoff will continue:

Negative factors
Increased interest rates
energy bills
inflation

Positive factors
lack of forced sellers
tight employment market
government support
immigration
some unknown insane government scheme to bail out the market.

gryffron wrote:

Tedx wrote:There was probably some resistance to tens of thousands of desperately poor & unskilled people living in sub standard housing with little medication or sanitation looking to emigrate and catch a free ride on a prosperous society.
Said India.

You've never been to India then Tedx? Or you might have smelt what real poverty is like. And realise how much the term is abused in the UK.

Gryff

It was a joke man. Chill.

Here is John Kingham's take on the housing market valuation:

https://www.ukdividendstocks.com/blog/u ... t-for-2023.

Despite house prices being so obviously high, most people also seem to think that house prices only go up. Or, if they do admit to the possibility of a property downturn, they think it will be limited to a short-lived decline of perhaps 5% to 10%.

The historical record, on the other hand, tells a very different story. It tells us there is a very realistic chance that UK house prices, relative to wages, could fall at least 30% and perhaps as much as 50%.

Interesting article.

FD

funduffer wrote:Here is John Kingham's take on the housing market valuation:

https://www.ukdividendstocks.com/blog/u ... t-for-2023.

Despite house prices being so obviously high, most people also seem to think that house prices only go up. Or, if they do admit to the possibility of a property downturn, they think it will be limited to a short-lived decline of perhaps 5% to 10%.

The historical record, on the other hand, tells a very different story. It tells us there is a very realistic chance that UK house prices, relative to wages, could fall at least 30% and perhaps as much as 50%.

The problem with that analysis is that I have been hearing that line since the 1970s. Meanwhile that first house I bought is now worth some 15-20 or so times what I paid for it.

And I am not sure that "The historical record, on the other hand, tells a very different story." In my experience, we get periods of high growth followed by periods of stagnant growth, and maybe modest declines, but nothing catastrophic like 30% or 50% (except perhaps in narrow segments of the market.

Could it be different this time? Sure. But history has been benign for those investing in property for as long as anyone can remember.

I don't think home owners and buyers think about house prices in 'real terms', anymore than we think about share price movements in real terms, so for nominal house prices to be static or marginally fall, whilst inflation carries on, is not a 'collapse' in house prices. Don't forget that mortgage debt retains its nominal value irrespective of CPI/RPI!

There is no such thing as a local in Devon and Cornwall.

CliffEdge wrote:There is no such thing as a local in Devon and Cornwall.

That is because the locals all chose to sell to non-locals.

CliffEdge wrote:There is no such thing as a local in Devon and Cornwall.

My local Parish Council suggests otherwise, they're busy looking after ̶t̶h̶e̶i̶r̶ ̶o̶w̶n̶ ̶i̶n̶t̶e̶r̶e̶s̶t̶s̶ matters of importance to the community

RC

ReformedCharacter wrote:

CliffEdge wrote:There is no such thing as a local in Devon and Cornwall.

My local Parish Council suggests otherwise, they're busy looking after ̶t̶h̶e̶i̶r̶ ̶o̶w̶n̶ ̶i̶n̶t̶e̶r̶e̶s̶t̶s̶ matters of importance to the community

RC

Are any of them under 80?

Tedx wrote:

ReformedCharacter wrote:

CliffEdge wrote:There is no such thing as a local in Devon and Cornwall.

My local Parish Council suggests otherwise, they're busy looking after ̶t̶h̶e̶i̶r̶ ̶o̶w̶n̶ ̶i̶n̶t̶e̶r̶e̶s̶t̶s̶ matters of importance to the community

RC

Are any of them under 80?

I don't know but most of them don't look it. And one of the recent retirees was over 90.

RC

Why is our local council invariably the enemy of the residents?

Lootman wrote:

CliffEdge wrote:There is no such thing as a local in Devon and Cornwall.

That is because the locals all chose to sell to non-locals.

I'm afraid few people would consciously choose to do otherwise.
After all, often one does not even meet the buyer, and if one tells one's agent that one wishes to sell only to locals, half the time they will ignore it anyway and play the innocent after the event.
The only way would be to apply a covenant which as already commented would undermine the price... that's a rich idealist's
game and in any event not going to be enforced in subsequent sales.

And then if the vendors have inherited - vendors who are no longer 'local' - that's another seller who's just going to sell.

The only parties with feasible control are local Councils who could at least restrict second homes, but that bird has largely flown.

V8

88V8 wrote:

Lootman wrote:

CliffEdge wrote:There is no such thing as a local in Devon and Cornwall.

That is because the locals all chose to sell to non-locals.

I'm afraid few people would consciously choose to do otherwise. After all, often one does not even meet the buyer, and if one tells one's agent that one wishes to sell only to locals, half the time they will ignore it anyway and play the innocent after the event.

The only way would be to apply a covenant which as already commented would undermine the price... that's a rich idealist's
game and in any event not going to be enforced in subsequent sales.

And then if the vendors have inherited - vendors who are no longer 'local' - that's another seller who's just going to sell.

The only parties with feasible control are local Councils who could at least restrict second homes, but that bird has largely flown.

In 2010 we sold our Devon property after 12 years. It was in a small town in Dartmoor NP.

There were about 25 viewings but only 2 serious buyers. One was a local lady who loved the property but was obviously struggling to raise the funds. This dragged on for a few weeks.

Then a buyer from London came down on the train, hired a car, showed up, and spent an hour at the property. A few days later I got an all-cash offer that could complete quickly.

So what is a poor boy supposed to do?

Compare UK house prices including imputed rent to US stock total returns over the last century and they broadly compare (flat trend line), but where recent years has seen house prices having zagged (relatively fallen behind). A 40% fall from here would have that ratio into unprecedented territory. House prices could spike upwards, as they tend to do subsequent to when inflation has spiked.

I suspect forward from here that you'd do better selling US stock to buy a UK house than you would selling a house to buy US stock. Inflation could easily be down to below 4% by year end 2023.

Citi suggest 2% (or less) UK inflation....

https://www.theguardian.com/business/20 ... -forecasts

Tedx wrote:Citi suggest 2% (or less) UK inflation....

https://www.theguardian.com/business/20 ... -forecasts

Jan 2022 CPI 114.9
Dec 2022 127.2
10.7% increase year on year.
Jan 2023 126.4, down a little, recent prices rises stalled. If prices don't continue on up then by Dec 2023 the CPI index could still be around the same 127 index value levels, 0% inflation. With energy price rises slowed/reversing, demand reducing (lower real wages), and towards the end of year the Bank of England could very well be more concerned about under-shooting their 2% inflation rate remit (avoiding deflation).

House prices in real terms 0% would be near 11% higher in nominal terms. Low inflation/interest (mortgage) rates and interest in buying property as a inflation hedge could be rekindled. But its all just guesswork. Actual circumstances/events yet to come will depict where we end up.

1nvest wrote:Jan 2023 126.4, down a little, recent prices rises stalled.

A couple of pointers in the opposite direction.

The first is the fruit & veg shortage. The other is the self feeding effect where mobile phone contracts in particular give the right to the provider of the service to increase prices by an annual cpi in April. Usually this doesn't amount to much, but it's going to be 10% or more this year.

Links
Fruit & Veg https://www.theguardian.com/business/20 ... -shortages
Mobile phone contracts
https://www.dailymail.co.uk/news/articl ... ments.html

Alaric wrote:

1nvest wrote:Jan 2023 126.4, down a little, recent prices rises stalled.

A couple of pointers in the opposite direction.

The first is the fruit & veg shortage. The other is the self feeding effect where mobile phone contracts in particular give the right to the provider of the service to increase prices by an annual cpi in April. Usually this doesn't amount to much, but it's going to be 10% or more this year.

Links
Fruit & Veg https://www.theguardian.com/business/20 ... -shortages
Mobile phone contracts
https://www.dailymail.co.uk/news/articl ... ments.html

Giffgaff - that uses the O2 network (who are hiking prices 17%) have promised a 2022 price fix, 'no more than what you paid in 2021' https://www.giffgaff.com/blog/giffgaff-price-freeze/

Guessing that's their contract renewal date (Jan 2023) so likely would see giffgaff prices spike significantly come then (or maybe them moving to a alternative supplier), but in the interim (April to December) see many migrate from O2 to others such as giffgaff, perhaps inducing a lowering of prices by O2/others or otherwise a outflow > increase in prices (lower profits).

Fruit/veg shortages are weather issues in Spain/Morocco etc., come the spring the demand > supply issues might ease. Inflation tent (up for a few months, back down again).

anteos wrote:Hi

I've not posted for a while, but anyway back to housing. I still think we're in a standoff at the moment. Lots of houses coming onto the market, but few forced sellers. In my local area the housing stock I watch (3bed +) reached a record level of unsold properties but have gradually come down. I have noticed classic EA tactics of houses being removed and then re-added at a later date. We've had a lot of people from Hong Kong move into the area and this has underpinned the market, but is starting to wear off.

The biggest shock to the market will be people refinancing fixed rate loans. Roughly 1.2m in the next year (me included) will coming off their fixed rates and have their mortgages going from 1%-2% to 4% - 6%+. This will hold back affordability on mortgages. I can see this becoming such a big issue (already lots of people moaning in the press) that I expect the boe will do some backhand FLS deal. Print a load of money and lend to the banks.

Bizarrely with baserates at 4% some banks are lending 5 year fixes at 3.75%. But I'd be surprised if a lot of money is available.

Go going forward I think the standoff will continue:

Negative factors
Increased interest rates
energy bills
inflation

Positive factors
lack of forced sellers
tight employment market
government support
immigration
some unknown insane government scheme to bail out the market.

Yes, there will be some mild falls as the froth built up over ZIRP era blows off, but unless there is a large surge in unemployment to create forced sellers then I don't foresee a large "crash" scenario. While the labour market remains reasonably good then housing will probably just plod along while inflation gradually brings price/income multiples back into line over a few years.

the 3.75% mortgage vs 4% base rate is simply due to the negative yield curve currently in effect. The market believes that rates will be lower a few years out than they are today as inflation subsides. could be wrong on that front of course, but that is what is priced in at the moment.