House market - how low will it go?

[scooterscot]

Ding ding! We have a winner. Thanks for that. Without credit there is no aggregate 'demand' for increasing prices.

FTFY

[ladymuck]

What about agreed sales that have been put on hold - if the market drops, the buyers could demand a lower price from the seller. Depending on why they are selling, this could present them with a bit of a pickle.

I seem to recall the opposite happening in the boom where sellers were demanding more more money because the prices were shooting up over the time it took to complete.

[MrMarkyMark]

I think that’s mostly true. However, the price of any asset, particularly an illiquid one, is determined at the margins. What percentage of the housing stock was being sold in early 2009? Transaction levels took a massive hit in the year through June 2019 at the same time prices were plummeting.

I wonder why that was, the B word the gift that keeps on giving

[AtW]

Two words: Inheritance tax.

[AtW]

I wonder why that was, the B word the gift that keeps on giving

It was B, now it\s C...

[MrMarkyMark]

The Government will extend mortage holidays to 6+ months if needed. Banks will also give loan holidays for everything else too.

They've already robbed shareholder dividends which gives them a cushion to carry on for longer (waste of time doing stress tests).

House prices won't budge.

I don't really agree, they might stave it off for a while, but I believe many people will liquidate extra properties they don't live in.
If there is too much of this activity and with a hard Brexit seemingly incoming combined with many businesses going kaput, it doesn't look good.

[AtW]

What’s good in 2nd home if you can’t use it in emergency like now?

[Whorty]

There may be low transaction level but the transactions that are made will be used to set the valuation of neighboring properties. That will then affect LTV levels which will affect mortgage and remortgage availabllity and price.

Are then any surveyors here who know exactly how this works?

DA

This is why I covered my @res and said 'mostly'; in my first response I agreed that the lender's valuers also played a role. People will only sell, when property prices are dropping, if they are 'forced' to; maybe due to loss of job, interest rates rising hitting affordability, children selling parent's house etc.

If people don't need to sell, they will hold on; less supply will reduce any major drop in the market prices. I know folks like a graph ... the below shows why today, despite high property values, mortgages are still affordable.

[MrMarkyMark]

If people don't need to sell, they will hold on; less supply will reduce any major drop in the market prices. I know folks like a graph ... the below shows why today, despite high property values, mortgages are still affordable.

They are, but the new standard of 60% LTV by the banks will definitely cool things somewhat.

[jamesbrown]

There may be low transaction level but the transactions that are made will be used to set the valuation of neighboring properties. That will then affect LTV levels which will affect mortgage and remortgage availabllity and price.

Are then any surveyors here who know exactly how this works?

DA

Yes, that's exactly what I said. Prices are determined at the margins. When transaction levels are low, a small number of transactions drive a big impact on all-of-market indices, as in early 2009. Volumes have have suppressed for many years now, so there's reason to expect the impact could be even more severe this time. However, it's really only those trapped into selling that are impacted.