I understand some of the thought processes, and that a lot of it is more of a hope than a prediction. The 2008 crash was caused by people being given mortgages they couldn’t afford if inflation was to rise. Then when inflation did rise, the rates became too high and people lost their homes. People see the inflation rise now and believe the same is about to happen, however, banks now have strict rules on how much they can lend. 4.5X your yearly income is the maximum almost everyone is allowed to borrow. You would be paying back a third of your salary per year with this mortgage, which leaves a large buffer for rate rises.
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It didn’t really pop in 2008 either, it was a small blip. By 2010 houses were worth more than they were in 2007 again.
The worst recession in living memory caused small deflation of house prices for a few months which was fully recovered and more in a couple of years.
What are they expecting? Armageddon?
It’s just young people who haven’t done any research and think the market follows common sense
Just look to the eighties
Because it makes people feel better to believe theories that work in their favour. They also don’t realise that if the housing market does go pop then it’s probably due to factors that mean they are likely out of a job.
I hear people referring to the “18year cycle” as if it’s a given. Even if they were right again a crash wont therefore be due for a few more years!
because interest rates have to go up. Its the only thing that is going to tame inflation. Furthermore schemes which are artificially propping up house prices are coming to an end which is why I hope the newest one, generational mortgages, does not come to pass.
_”4.5X your yearly income is the absolute maximum they can legally lend”_
That’s not true at all. A lot of lenders have policies along those lines to protect them from defaulters but there’s no legal limit.
It’s not uncommon for lenders to offer 5 times salary mortgages to people with good credit ratings or even 6 times to people working in very stable professions like doctors or lawyers or people who are remortgaging.
At this stage I don’t think it will. It might dip but I don’t think it will “pop”.
A cost of living crisis hasn’t slowed it down much, pandemic didn’t slow it down much.
People want to buy houses and demand continues to outstrip supply.
At the end of the day house prices aren’t set by banks, or indirectly by interest rates, or propped up by governments, they reflect buyers confidence in their and everyone else’s prospects for the future.
Sure, governments and banks can try and manipulate that confidence – but they don’t get to tell people how they feel. And have feelings of confidence ever run so low? Has there ever been a government so miserably piss poor at instilling confidence in the future?
House prices have been rising so much over the years, they are now out of reach for alot of people.
Therefore at some point houses are not going to sell, house prices will drop, people who paid extortionate amounts for their houses previously will be in negative equity.
>4.5X your yearly income is the absolute maximum they will lend
That’s not strictly true though. Up to 80% LTV we’ll go to 4.75x, and certain lenders in London will go up to 6x on terms at or over 35 years.
I took a look in the 3 estate agents windows in my town. LOTS of sold stickers filling the windows. I don’t think houses are struggling to sell any time soon.
The fact is younger generations are struggling, but there’s plenty of well off older people who aren’t feeling the cost of living crisis at all, it just feels like EVERYONES struggling because those are the vocal ones on social media.
What we really need is a good old fashioned war, or a pandemic that kills the young. That’s about the only way house prices will stabilise.
1) The market is already dipping for certain housing classes and locations. The price of flats in London is already going down, for example.
2) However, point 1 illustrates why this is not about artificially inflated demand, but about the relative supply and demand in a market where – due to WFH – there is a race toward space and good locations. Which, for the average British person, means semis in a rural-ish area close to a train station. Guess where supply grows the least due to stupid and NIMBY planning? Rural areas.
3) However, this also means that prices are inflated by a triple squeeze: First, councils and developers still have to respond to the change in demand, as the units ready today are those planned 5-6 years ago. Second, some people still have a shitload of money from the stock market boom in 2020-2021. Third, the rising interest rates will demolish people’s pension funds and put downward pressure on house prices. But we are still at record-low (in historical terms) interest rate levels.
Pop? Maybe not.
Dip (or grow less than wages soon)? Absolutely.
I think it will take a minor dip, or plateau, because rates are going up so demand will naturally come down a bit. Can’t see a ‘crash’ happening though
P.s there are plenty of lenders who lend beyond 4.5x salary
The principal is the same, even if it’s not mortgages, too much debt and money printing. May see several markets pop, but likely things will continue to get more expensive at more alarming rates.
One thing I’m pretty sure of is there will be big food hikes around September
It will go pop but it won’t be the only thing and it will most likely be part of a much larger economic upheaval which will affect everything and everyone, well, except rich people of course, nothing affects them.
Firstly banks lend a lot more than 4.5x your salary. Your claim that it’s the absolute maximum is completely untrue. In fact, this is the default MINIMUM across the market. Some banks lend 7x.
To address the wider point, people believe it will pop because that’s what they want to believe. That’s literally all it is.
It’s not gonna crash and burn, but will definitely retreat over the next year or so as its becoming so unaffordable that supply will hugely outweigh demand at some point
The rate of acceleration will surely reduce once we’re really into the impact of energy and food price increases later this year, but I can’t see an actual “pop” – there is surely still too much demand versus supply for that to happen, outwith an extraordinary jump in interest rates.
wishful thinking and a general naivety/ignorance as to the factors the lead to and result from a housing price crash.
You have a lot of redditors who wish for a market crash largely out of jealousy that they themselves are not on the ladder, not realising that if there is a crash, the market slows, fewer houses come onto the market, it’s harder to get a mortgage as lenders tighten their criteria, and the ripples through the entire economy probably mean they’ll lose their jobs.
It’s economic naivety coupled with spiteful jealousy and I see the fallacy far too often on UK subs.
They are just hoping it pops. They don’t understand that if the market crashed the chances of getting a mortgage are slim as the banks will hold the money back. I know loads of people who are in the market looking a buying and have said they are waiting for the crash. At this point even if the market dropped it would still be massively overpriced estate agents near me are not even giving a value anymore just saying offers over 250k and people go nuts and end up paying 300+ it’s madness.
It is already happening, the market has slowed down for new houses and builders merchants are slowing down too. I’ve heard of a couple building companies now that aren’t as busy as they were. It’s a lot more then just the banks stopping it at the moment.
The materials alone are going up in price every month, what used to be £10 last year is now £30 or more.
If the housing market does go pop, it just means that you’ll be renting off a big company rather than some leveraged boomer with three houses painted in magnolia. It’s not impossible but it will only happen in tandem with a collapse into very high rates of inflation, business closures and massive reductions in public and private spending (including your wages). Given that we’ve run the whole national economy on credit backed by house prices for a few decades, no government that actually maintains any degree of control will let it happen (as Brown didn’t in 2008).
We’ve just been through a post-covid boom with house prices, so it’s likely that given the interest rate rises, possible recession and caution from banks that we’ll see these now level off, or maybe fall slightly.
House prices did crash in the late 2000s due to the credit crunch. But this was a short term response to higher unemployment and significant restriction in mortgage availability. The moment those things were resolved prices sprung back to their original levels, and then continued to boom again.
When the supply of housing is largely static, and demand continually rises, there is very little reason to believe that the market will crash.
Inflationary pressures and interest rate rises, something has to give eventually. Global crash is already underway, house prices will be the last to buckle.
“banks now have strict rules on how much they can lend” – Bank of England scrapped this last month….
I bought my first house in 1978. Mortgaged to the ears and an interest rate rise increased my *second* mortgage payment by 40%. But obviously I survived and have done OK out of house ownership. I think (from memory) I’ve seen three major slumps in the market.
We bought a house in 1992 or 93 for roughly 60% of what our next door neighbours paid a couple of years earlier. I think they were in negative equity for 5 or 6 years until they managed to sell for what they paid.
IMHO it’s not just 2008 you need to look at, there have been other property troughs, it really isn’t a continual upward line. I have been thinking for a long time that people are seeing property as a safe bet but we’ve been living through a period of historically low interest rates.
Like it or not, if your mortgage interest rates go up by 2 or 3 percent some people will fold. Distress sales = lower prices. Buyers get nervous seeing prices falling. or decide to wait for the bottom, so less demand = lower prices. Suddenly the people that *have to* move are fucked by the market. People who have bought as a buy to let investment during a rising market are going to find their repayments going up but the rent won’t. If they can survive it, they’ll do OK long term but it will take a while.
I just feel inflation, increasing interest rates, poor growth, looming recession and a massive property price bubble are all the signs that I’ve seen before. And for many people it hasn’t ended happily.
They’ve been saying it’s going to crash since the mid-90s. Apart from that blip in 2008 and some corrections among superexpensive mansions, it’s just been up ever since.
Until middle-class voters worry about repossession again and the banks are worried about disposing of lots of houses, I can’t see it happening.
The way housing will stop rising in price is two fold:
1. The population declines
2. Foreign & domestic investments in property become unfeasible. See point 1
I think is less about the market crashing but not being in such state that people are offering over asking price and rushing to buy properties.
When I buy my house I want to take my time and check the place properly not be in a crazy competition with other buyers
I personally don’t think the housing market will pop but stagnate and possibly decline (but not as dramatically in 2008).
People will stop buying due to stagnated wages and increasing market prices making it unaffordable for them. People already on the market who want something bigger may have to sell cheaper to be able to get rid of their properties in order to move up or they’ll keep hold as they also don’t have the finances to move up the property ladder (may extend for additional space, I guess).
FTB may be out priced by downsizers (except in the FTB new build schemes).
All of it will cause there to be less available / desirable properties.
I can’t see it crashing, if I’m honest, and if it does then it won’t make house prices more affordable to non home owners as the economy would be in such a dire state that they still would t be able to get a mortgage. I think you might see people extending their mortgages in order to meet monthly repayments, and/or companies buying up the housing stock and renting it back to people. Likely making the housing crisis worse.
They only thing likely to bring house prices down significantly is some kind of pandemic/disaster which significantly reduces the population (without destroying the housing stock too), or a massive uptick in supply arising from a significant relaxing of planning laws and a load of cheap houses being built (seems less likely than the first scenario!)
From their crypto trading “expertise”
While the population continues to grow, it’s unlikely that the properties prices will fall. It’s all about supply and demand, and property developers can’t keep up with demand
It’s not, it’s all being snapped up by investment firms. It won’t ever stop, these firms are building generational wealth with generational worth.
Modern day feudalism is about to kick in. Can’t wait to be a serf.
Nobody knows if it’s going to pop or when. It’s easy to predict things but hard to be right.
Hopium.
A few reasons prices might fall, off the top of my head:
1. The ratio of median house price to median income is at an all-time high, so houses are the least affordable they’ve ever been. If people can’t afford a house, they won’t buy a house, reducing demand.
2. The BoE is raising interest rates, which makes mortgages more expensive, further suppressing demand.
3. In the longer term, we have a top-heavy demographic profile. The baby boomer generation will start dying of old age over the next couple of decades. The GenXers will inherit those houses and most will sell them, which increases supply.
A few reasons prices might just continue going up, off the top of my head:
1. Investment firms like Black Rock and Vanguard are going around hoovering up houses as they go on the market, offering 20-50% over asking price to make sure nobody else can get them. This reduces supply.
2. Pretty much everyone agrees there’s a recession coming, and if property developers have to make cut-backs, that will reduce the number of new builds coming on the market.
3. Population is still growing, and all those people still have to live somewhere no matter how mad the price is. This pushes up rent prices, which in turn makes buy-to-let a more attractive investment for those lucky enough to be able to afford it.
If the housing market goes down, corporations will buy up all the city properties and own the cities and turn us into nations of renters. Look what happened to San Francisco after 2008. Look what zillow have been doing. This story doesn’t have a happy ending for buyers
Boomers who retire stop buying property after they stop working. They didn’t have many kids to keep up the consumption.
Because a few sensationalists have repeated on the news and the majority of people just parrot what they hear.
The housing market has been about to burst for decades.
And I entirely agree it’s massively overpriced and horrific for people to get on the housing ladder, but people are somehow still managing to buy out 700,000k estates up north off plan on release so enough people clearly have plenty money to burn propping it up.