House prices: 50% falls before fair value

[expat]

... (of course a person on average wage would expect more than a bottom-of-the-rung property) ...

Therein lies the problem.

[ferret]

Therein lies the problem.

Not what I meant! Just meant that someone on an average wage would be looking for an average property. You would expect a one bed flat to go to someone on a below average wage surely as a one bed flat should be the cheapest you can get. Yes I am not taking regional variations of class or quality of area into account. But using an average wage and the lowest rung on the ladder was just suggesting that prices could (should ) go even lower than 30% down.

Bagpuss - a lot more of these in the pipeline. A bit more pain, a few more quid on the weekly shopping, a few more pence on petrol, coming off a 4.5% fixed rate onto a 7% mortgage. A lot of people have borrowed excessively and I do think a lot of people will go to the wall. When the banks start getting hit with people defaulting on cards and houses going under and due to houses being in -ve equity then surely this thing could spiral out of control. Is mad how many people (anecdotally) seem to have interest only mortgages. With prices this high it was the only way for some people to get a home of their own. I tried to convince a friend last year to rent rather than buy but she went for an interest only mortgage of £160k on a tiny two up - two down terrace and she is not even on £30k per year. I do fear for her and others like her.

Bogeyman - read a few of your fake doom threads, understand that you are cool with you BTLs and that a lot of this talk will not effect you even if we do go for a 20, 30, 40 or even 50% drop, but surely you can see that a storm is brewing? I think Turion and BB have a right to be wearing the "The End is Nigh" sandwich boards. Hopefully will not be as bad it could be but with the levels of debt people have the extra whammy of house price drops could push a lot of people over the edge.

[Bagpuss]

What many people on this board forget is how modest the average take home pay in this country is, most people are on sub 20k after tax, or sub 35 for a couple. A rise of 15% in household bills, or credit crunch 20-50% increase in mortgage costs means nothing to a well off contractor for his mortgage or BTL, to an average household it's crippling. Ultimately the market will not be determined by our ability to pay but the ability of Mr/Mrs Average.

[expat]

What many people on this board forget is how modest the average take home pay in this country is, most people are on sub 20k after tax, or sub 35 for a couple. A rise of 15% in household bills, or credit crunch 20-50% increase in mortgage costs means nothing to a well off contractor for his mortgage or BTL, to an average household it's crippling. Ultimately the market will not be determined by our ability to pay but the ability of Mr/Mrs Average.

Absolutely right. And indeed the abolition of the 10% income tax rate band: not crippling perhaps but a lot of ordinary people will be noticing it.

ferret - sorry didn't mean to hijack your useful thoughts with my comment.

[BrilloPad]

One wonders how common this situation will become:

http://forums.moneysavingexpert.com/...7#post10711237

We have just calculated all of our debts and we are about 40k in debt to unsecured debts.

We have a mortgage to which we owe £169,000, we have had no secure debt on the property but we do have a charging order on it for £2,100.

The mortgage repayments are interest only at £1070 a month plus a further £105 for arrears of £2000.

We have had the house valued at £199,950 but we are not going to get that for it in todays situation and we have been offered £184,000 for a quick sale from one of those avoid repossesion companies.

What shall we do? we are thinking about selling to this company and going into private rented because we just can't see a way forward. We can't afford to pay the mortgage, it's just too high!!

If we went bankrupt, do we have enough equity in the property for the OR to sell it from under us?

Interesting reading the entire thread to see their earnings :-

I hate having debt hanging over me and I am looking for a second job to help with finances.

The situation is.........
I work 30 hours per week for approx £500 a month
Hubby - self employed builder/plasterer can earn in the region of £4k a month, WHEN he can find work

When he is out of work, we claim tax credits, we have 3 children all in full time education.

We have cut our grocery bill from £120.00 pw to £70
Elec and gas are metered
Arrears with water & council tax, we pay what we can when we can, but obviously we have to eat
Then there is the mortgage, the arrears, the debts

I'm not expecting to walk away with a huge profit from selling the house, just to make life a little easier and reduce our outgoings, we can't afford a mortgage of £1070 a month and the arrears, but if selling it is not the best option, then we will battle on, but loosing the house one way or another is probably our only option

I reckon they should sell to the quick deal company.

[BrilloPad]

Not what I meant! Just meant that someone on an average wage would be looking for an average property. You would expect a one bed flat to go to someone on a below average wage surely as a one bed flat should be the cheapest you can get. Yes I am not taking regional variations of class or quality of area into account. But using an average wage and the lowest rung on the ladder was just suggesting that prices could (should ) go even lower than 30% down.

Bagpuss - a lot more of these in the pipeline. A bit more pain, a few more quid on the weekly shopping, a few more pence on petrol, coming off a 4.5% fixed rate onto a 7% mortgage. A lot of people have borrowed excessively and I do think a lot of people will go to the wall. When the banks start getting hit with people defaulting on cards and houses going under and due to houses being in -ve equity then surely this thing could spiral out of control. Is mad how many people (anecdotally) seem to have interest only mortgages. With prices this high it was the only way for some people to get a home of their own. I tried to convince a friend last year to rent rather than buy but she went for an interest only mortgage of £160k on a tiny two up - two down terrace and she is not even on £30k per year. I do fear for her and others like her.

Bogeyman - read a few of your fake doom threads, understand that you are cool with you BTLs and that a lot of this talk will not effect you even if we do go for a 20, 30, 40 or even 50% drop, but surely you can see that a storm is brewing? I think Turion and BB have a right to be wearing the "The End is Nigh" sandwich boards. Hopefully will not be as bad it could be but with the levels of debt people have the extra whammy of house price drops could push a lot of people over the edge.

Well the Bank of England agree with Bogeyman.

You talk as if there will be a revolution of some sort. The population is growing due to immigration. There are strict planning controls. People are using houses as a pension (though at the moment they are going into shares - for how long?).

Joe Average should feel hard done by. By while (s)he can read the sun, support football and watch big brother he will be happy. If s(he) decides to open their eyes then there might be trouble.

[bobhope]

The population is growing due to immigration.

Who are starting to return home now that the pound is weakening.

I sold my BTLs a couple of years ago and will return to the UK market when there's value again.

My only possible reservation is the demographic shift - we're only 2-3 years away from the first baby boomer retirement wave.

Check out the government population statistics website - very interesting stats and charts on demographics.

Also on household incomes - the median income is approx 25k gross. Moreover, the 90th percentile income is something like 40-45k, so not massive. Which begs the question: why (not how) are house prices so high?

[BrilloPad]

Who are starting to return home now that the pound is weakening.

I sold my BTLs a couple of years ago and will return to the UK market when there's value again.

My only possible reservation is the demographic shift - we're only 2-3 years away from the first baby boomer retirement wave.

Check out the government population statistics website - very interesting stats and charts on demographics.

Also on household incomes - the median income is approx 25k gross. Moreover, the 90th percentile income is something like 40-45k, so not massive. Which begs the question: why (not how) are house prices so high?

http://www.telegraph.co.uk/news/ukne...in-Europe.html

The population of England will increase by a third over the next 50 years as it becomes the most crowded major nation in Europe, official forecasts suggest.

===================================

Why are house prices so high? IMO it is not because of BTL mortgages - I did some stats on another thread and I reckon the BTL mortgages cover about 10% of house turnover.

But I know alot of peple with a few houses - bought with cash and using as a pension. Also, I have heard that one thirs of rented properties are done by companies with more than 100 houses.

Are these people currently investing in shares? Where will they invest next.

[bobhope]

The population growth comes exclusively via immigration, which as I said before, is looking less likely due to:

1. Deteriorating economy / weakening pound
2. The poles, etc. will soon be allowed to work in the rest of the EU

The underlying demographics point to negative population growth.

[snaw]

The population growth comes exclusively via immigration, which as I said before, is looking less likely due to:

1. Deteriorating economy / weakening pound
2. The poles, etc. will soon be allowed to work in the rest of the EU

The underlying demographics point to negative population growth.

Actually that's not true. Immigration accounts for about 45%, the rest is slight increase in birth rates and falling mortality rates.