How OVERVALUED are UK House Prices?
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- เผยแพร่เมื่อ 28 ก.ย. 2023
- A look at how overvalued the UK housing market is looking at data on price to incomes, mortgage rates, and prospects for the economy and comparing it to renting.
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How a house price fall would affect you. th-cam.com/video/4prUAfa8UE4/w-d-xo.html
It is difficult to make exact projections for the housing market as it is still unclear how quickly or to what degree the Federal Reserve will reduce inflation and borrowing costs without having a substantial negative impact on demand from consumers for anything from houses to cars.
For 2023, it’s hard to nail down specific predictions for the housing market is because it’s not yet clear how quickly or how much the Federal Reserve can bring down inflation and borrowing costs without tanking buyer demand for everything from homes to cars.
I suggest you offset your real estate and get into stocks, A recession as bad it can be, provides good buying opportunities in the markets if you’re careful and it can also create volatility giving great short time buy and sell opportunities too. This is not financial advise but get buying, cash isn’t king at all in this time!
You are right! I diversified my 450K portfolio across various market with the aid of an investment coach, I have been able to generate a little bit above $830k in net profit across high dividend yield stocks, ETF and bonds.
I'm intrigued by your experience. Could you possibly recommend a trustworthy advisor you've consulted with?
Credits to 'Natalie Lynn Fisk' she has a web presence, so you can simply
If you are a young person now, why should you work hard your whole life when the rewards just aren't there anymore? No mortgage, no retirement, both parents need to work just to make ends meet so no time to spend with your family... this country is broken.
Oh I don't know, maybe because working hard for the things you want is rewarding, drives you to progress and develop yourself socially and professionally? This type of thinking is what gives us so many lazy young people.
@@Adam-mo2qw real wages are declining, energy bills are 3x what they were 2 years ago, average house is 9x average earnings compared to 4x in 1990. Pension age to be raised to 72. But keep working hard for your car and some new clothes😂
Why? Because of we look back every generation from the 50s could've said the same thing and they faced worse conditions, geopolitical situations and economic conditions. We look back using hindsight with rose tinted specs. But trust all these people who talk sweet about their house purchase in the 80s and 90s are forgetting the strife that had to be endured.
But it was those who worked hard, took calculated risks and had loads of luck that prospered. By all means give up, but there'll be someone who takes your place, grasps that opportunity and has fun doing it. Stay smart.
@@chuck275 i haven't given up, we have Bitcoin.
@@Adam-mo2qw The question is why would anyone working hard and doing that stay in the UK when they could do the same and have an easier time emigrating?
If the price of my parents' house in Surrey had followed inflation, it would now be worth 145k, not 500k. Since I started working, I was never able to get on the property ladder. So, I left England at 35, moved to France and now after 22 years I have a large flat that was half the price, fully paid off and a good salary in a job I love. I have a better quality of life than if I had stayed in that rotting country where the only thing to look forward to for most people is Saturday night at Nando's.
Wow 😂 100% though. I moved away too and don't understand why anyone still lives there.
That's great and all but France is full of french people
@brifkandr31 Where did you go? I have a very well paid job and I'm not sure how I could transfer my skills to another country but Britain is becoming worse and worse.
@@cameronjones8641 The South of France. Working for an IT company. Sure beats Croydon! Unfortunately Brexit may have scuppered any of your future plans.
i wouldnt be so cocky about your new life in france as after niger stopped uranium going to france for virtually nothing i can see fuel prices rocketing there soon!@@aacmove
The rise in inflation didn't catch the Bank of England off guard. They were the ones printing massive amounts of money, that always devalues currency. None of this is accidental
I am not sure but they didn’t start the war in Ukraine, pandemic and brexshit. That goes against your point
@@ozjob The trouble is, yes they did. Wake up. Pick one and I will explain to you exactly how. Every big event is globalist theatre designed to erode our nations & liberties
@@ozjob no , the quantitative easing the banks have been doing since 2008 . You honestly think that war isn't a massive money laundering scheme?
@@ozjoball three of the events you mentioned are making or have made money for the very same small group of people that actually decide monetary policy.
@@lukemclellan2141 no it hasn’t that just making it up. I tell how I know that……prove it.
I think one thing you missed, wage growth is heavily offset my stealth taxes. People will be getting paid more but are pushed up into higher tax brackets.
Yep, wages growing but 40% of that taken away via tax, plus additional % in NI/pensions/student loans
@J1M1F Increased council taxes , upcoming green taxes Increased food and utilities are making the actual wage increase Impossible to work out accurately (although we know in real terms it's dropping)
Also offset by the living crisis (especially the rent)
Wage growth giving diminishing returns
@ronjones8696 but then people would realise how poor they actually are.
Because so many people overpaid for homes even while loan rates were low, I believe there will be a housing catastrophe because these people are in debt. If housing costs continue to drop and, for whatever reason, they can no longer afford the property and it goes into foreclosure, they have no equity since, even if they try to sell, they will not make any money. I believe that many individuals will experience this, especially given the impending mass layoffs and rapidly rising living expenses.
To balance out your real estate holdings, I suggest investing in equities. If you're cautious, even the worst recessions can present fantastic buying opportunities. Additionally, volatility can produce fantastic short-term purchase and sell opportunities. This is not financial advice, but you should buy immediately away because money isn't king right now!
You're right. I was able to diversify my 450K portfolio across markets with the aid of an investment coach, and I was able to use high dividend yield stocks, ETFs, and bonds to generate a little over $830K in net profit.
You can employ another adviser, but Julie Anne Hoover is my one who provides guidance. She has years of knowledge in the financial markets, and her approach has worked for me in the past, leading to my success. She offers points of entrance and exit for the securities I prioritize.
I located her, sent her an email, and scheduled a call; hopefully, she will reply because I want to start the new year off financially strong.
I am seeing reductions between 6% - 28% on Rightmove across Greater London.
Anyone who thinks that there wil be a minor adjustment is simply not living in reality.
50 % by the end of it all
Or living in other city
Yes, and we are still in the stand-off phase. Houses are not selling at current prices. The actual market clearning price, where all the houses for sale actually get sold, is a lot lower.
@@mikeparrott8304deluded
Get a grip
Would be better to compare House prices with Earning AFTER TAX and see how bad it really is, more taxes on the higher wages just increases the problem as you cannot save that money.
I think a 35% drop would be a massive shock but I think its more likely to be less because anyone selling cant afford to drop their price by that much and cover their costs of moving to another property so will probably just not sell which will reduce market stock. Also consider that the massive increases in material and labour costs mean that housebuilders can't sell for less so will build less to reduce stock to try and keep demand high.
I have just got my keys for a small 2 bed house in the North West. It was originally at 185K, discounted at 175K. I offered 170K and we agreed at 172.5K. I probably could have waited a bit more. There are now bigger and cheaper houses on the market, but I needed to move before winter kicked in. Plus, interest rates still haven't fallen much. Even though, a few years ago, that house would have been worth 150K-160k, I am happy with my purchase.
I think anything less than 200k for a property to live in the rest of your life is fine and you will never be stung by house price drops
That is 1990s house prices.
Prices in the North West have barely dropped at all, so I wouldn't regret your decision.
@@lordprotector3367Don’t be ridiculous.
@@DiscoDrew I'm in Surrey, so the comment is from that perspective.
Excellent summary. An economist with a nuanced, balanced outlook - a refreshing change!
I would highlight though that 70% properties bought in areas of London are bought by foreigners. To this extent global factors could also play a part with pricing.
According to the Land Registry there are 280,000 homes owned by foreign home owners in the entire country. Now, even if we considered that 100% of these are concentrated in London, there are 3.7million homes in London and 280,000 of these would be 7.6%. So you appear to have shifted the decimal point one place over to the right.
Whats going on right now irrespective but connected is a global liquidity deflation. That means debt is being recalled and all asset classes which are leveraged on debt will be hurting.
Houses are one metric of debt, which for the last 17+ years has been a debt bubble growing and thus one to coreect the most.
1 bedroom flats in London are 300-400k, I wonder what created this awful situation
Low interest rates for 15 years and buy-to-rent incentives.
@@borisj more like not enough housing being built, this is a supply side issue.
@@warmonkey96 No it's not, it's ridiculously cheap debt.
@@nicky_nike sure that's part of the larger issue of cheap credit/debt over the last few years, but there are simply not enough houses being built to meet demand. The UK government misses its build target every year.
@@warmonkey96 Look at the new build sites. They used to show say 14 houses reserved and 2 sold. Now it's the other way around. One main builder had 200 sites, so that's approx. 3,000 unsold houses, and that is one of how many big builders? There must be 30,000 unsold houses. There is no shortage. There is however, a shortage of sensible pricing.
I don't think house prices will fall 35%. But I also think we should ignore the likes of RightMove, Zoopla and anyone else who has strong incentive for house sales to keep moving, and for prices to stay high. They're almost certainly underestimating the falls.
Ignore RM and Zoopla, lying vested interests.
@@nicky_nike Agree, I also think the same about the BOE lol.
Estate agents are the parasites that are part responsible for these high prices. They get a percentage so it's obvious they are going to want prices to stay high
Never been happier to offset my purchase decision to buy in 2022 to 2025 and beyond.
That would have been a terrible financial decision.
Glad i used my logic and research on this one.
Me too... Ready to buy my first house, but looks like I'll have to wait til I'm in my 30s now!
@@Jake01273 I'm in the same boat. When you remove the emotion and peer pressure from it ( crowd isn't always the smartest) it's for your own good.
Yet another brilliant and evidence based review of the housing market. I love your videos. Keep up the good work and high quality content. I’m thinking a peak to trough fall of 25%. This will vary from region to region quite a lot though. 👍🙏
I agree with the analysis presented here and I also agree strongly with the regional variation in house prices. Some areas are hotter than they were in 2007 while others are still down 30% from those peaks. Everything makes sense with regards the data and likely future price action but will it turn out that way? Not necessarily. Look at what gold and silver are doing right now
Economic investigator Frank G Melbourne Australia is still watching this very informative content cheers Frank
My rent increased almost 20% in the last 2 years. And if I buy a similarly priced house I pay a mortgage almost equal to rent. I respect the analysis, but buying still makes sense to me considering that the rents dont seem to slow down.
And once you buy the house the capital on the loan is frozen in time, and therefore the mortgage becomes a smaller and small part of your income. If we consider inflation at 2% for 25 years and assume your wages simply keep pace with inflation, your mortage repayments will be 64% cheaper at the end of the 25 years than they were at the beginning, whilst rents will have risen in line with inflation. Better still, high retail price inflation gives rise to higher wage inflation and that makes your mortage even cheaper, whilst rents are rising even faster.
Either wages will rise or rents will fall massively on rising unemployment.
There is a 6 month lag in the sold prices of homes, those that have access to this data early have indicated the median house has declined in price by 15% since February (watch homes with Charlie video earlier this week) and this is accelerating. This should not come as a surprise given the highest taxes in over 70 years, the lowest levels of disposable income since the second world war and the most overvalued housing market in over 120 years on the back of huge amounts of ultra cheap debt which created a mega bubble. The average house in the UK would need to fall in price by 60% to get back to the long term wage to house price ratio, then a 35% drop in prices is still fairly optimistic. There has been a 20 year housing market bubble and we’re now entering a new era, I expect a historic decline as house prices are fundamentally unsustainable regardless of there being a shortage.
The housing crisis is now also resulting in a major lag in economic growth, if the population is spending an excessive potion of their income on housing they have less to spend in the real economy which is what drives growth and employment, people also feel poorer and less financially stable and as a result spend less. Stagnant growth leads to less foreign investment, leading to a weaker pound and higher costs of imports which drives inflation. The housing market needs a major crash or the economy will continue to decline. Young workers will also leave the country in search of better opportunities if the cost of housing and taxation is too high leading to further economic decline. The banks and government should never have allowed house prices to become so unaffordable as the long term damage is now having a huge effect on the country.
its weird that after 1997 something happened, a great mystery, and since then house prices have never been below 5x earnings, its a complete scooby doo mystery
I would like to see what your opinion is about indexation. In Belgium they think it works well and inflation dropped to less than 3% while indexation is supposed to fuel inflation.
Couple of issues with your analysis:-
1] I took out a mortgage last year - but it was a fixed rate for 5 years, at 3.5%. So I'm not feeling the recent interest rate increases, and actually as my salary went up 6% I'm actually better off now than I was last year. I'm not alone - a lot of people re-mortgaged last year, realising that rates were likely to continue to rise. Those that didn't probably didnt have such tight finances in the first place
2] Claims that everybody is having to tighten their belts must in aggregate be incorrect, since we are no in a recession - so spending remains at high levels.
3] Wages went up last year. The ONS is claiming by an average of 8%. So that significantly counters the rise in inflation rates
4] Because Inflation is a year-on-year measure, and because the uptick in prices was a result of sanctions on Russia last year, the inflation rate will fall towards 2%. This is a mathematical certainty. Thus the reason for high interest rates will have evaporated by the end of the year.
5][ Due to mass immigration and the subsequent growing population, demand remains high.
6] The government continues to show willingness to do whatever it takes to house immigrants - which means much of the housing market will continue to be underpinned by some form of government rent subsidies/housing benefits.
7] Housing is traded at the margins. It's all very well saying "Well the only reason prices remain high, but that's only because people are not selling" - but in the end that's all that matters. If everybody was selling all their housing all the time it would be a very different story, but a stagnant market with a growing population underpinned by public spending on housing benefits guarantees high prices.
Needs a massive reduction. Way over the top for years. No relatives left in London now. All forced to move out. A no go area for many.
A 20% drop is most likely average. There is frothy prices on some properties where 30% drop is very possible.
I'm not well informed on anything relating to this and i'm at low end of market i know, but i bought my house around 7 years (84 months) ago for between 80-90k. My mortgage throughout that period has been consistently around £400 per calendar month cheaper than renting it would have been as i had a bit more than enough for the deposit to reduce my borrowing a very small amount. I think in that time the decision to buy has saved me around £30k in wasted money on rent alone.
At one point my house was valued close to £115K with me having done minimal alterations, i assume its now lower than at purchase time but it might not have dropped that far. I suppose my point is that even if i sell my house for the exact figure i bought it for I will be in a much better financial situation than if i'd continued to rent through that same period. What i don't fully understand is that if there is a shortage of affordable housing and our population is continuing to grow how much can house prices at low end really drop by? And with rent only going up, there cant be any logical reason that i'm missing as to why intentionally re entering the rental market as a tennant is a better idea can there?
Why would your house be worth less than 7 years ago?
@@ln5747 I dont know its current value, but all anyone is saying is house prices are dropping across the market and will do so for a while so i assume the value of mine has dropped, but i don't know by how much.
A house's value is determined at time of sale.
If you buy a house for £100k then it increases to £300k and later drops back to £200k, have you made £100k from when you bought it or lost £100k from its peak.
Neither while you still own it.
You live up north. Where job market does not exist. So prices are not inflated.
@@ennuied ok so does that mean i wont lose out to the extent of people down south like you? Great news! thanks!
@economicshelp Can you please define what an optimist and pessimist is when it comes to house prices?
What is the potential impact of Chinese property market crash on UK property market?
Because it can be 2008 all over again, on top of all the other things we've been dealing with
and then
rumour has it the insolvency of Birmingham city council was just a tip of the iceberg - there are loads of other councils, up and down the country, which seriously struggle with their finances
what would be the impact of this on the property market - as insolvent councils have to severely cut their spending?
What happens if a large group of owners representing one geographic point of origin which is beginning to suffer a massive crash suddenly have to draw on their overseas investments in order to maintain their lifestyles and settle their obligations in their home country. The motivation to sell would come from the fact that your domestic assets were literally worthless. Not forced selling but high pressure selling all within a short time frame as the Chinese economy slides into the abyss. If they all primarily invested in one geographic part of the UK one could see that having an oversized impact.
China's global property tsunami is on its way, hold tight.
At the beginning you used 2 different data sets to compare house price to income ratio and compared them
I am a first time buyer looking for a house around £500k. The number of properties which have been discounted is incredible and this is now becoming a buyers market. I’ll wait until they drop from £500k to £450k and then offer £400k. These very properties were being sold in the last few years for £600k
I would be very careful with this strategy. Are you buying cash or using a morgage and if so what percentage is your deposit?
Better strategy is to wait more and offer 300K. And if you can wait long enough maybe you will get it for free.
Why would you pay so much for a little one or two bedroom home ? The uk isn’t worth it no more
Wait for the market to bottom-out.
@@Vincity1183 no afordable rents available.
Taking a house near me as an example - the 2002 price vs the 2023 asking price, adjusted for average weekly wages, is 125k vs 150k. So is currently 25k overpriced.
That is of course assuming that 2002 prices weren't already overpriced!
It’s already fallen 10%-15% at the front line today so you may want to change your prediction.
Interesting video thanks for sharing. However, imo, you have left out one of the most critical pieces when discussing pricing any asset- the value of the currency it is denominated in. You compare back to the 90s but if you are going to do that you need to state the debt:gdp ratio which are exponentially higher now. The central banks around the world are in a debt spiral and have no other way to stay alive other than issue more debt to refinance the previous cycles debt (print money). The bulk of the debt issued in covid is set to be refinanced in 2024/25 meaning record amounts of money is to be printed worldwide. This will be a huge tail wind for all assets including housing. You did a good job of outlining the headwinds which I agree with but that needs to be balanced with the tailwinds of currency debasement. My house went up 30% in less than 2 years after covid. Why was that? I would suggest the primary factor was the debasement of the currency.
Good analysis. You forget the major demographic issue facing the UK. We haven’t felt it yet because the BOMAD aren’t all in their final homes, and we haven’t had a highly sustained negative birth rate like, for example, Spain or Japan. Once BOMADs are in their final homes and assuming their asset taxes and intergenerational wealth is organised efficiently, you’ll see a much bigger drop. Anything over 4x earnings is unsustainable. BoE rate hedging is just a band aid
It is sustainable because the government is taxing the middle class singles to fund Universal Credit for low income families with kids, including a ever growing number of minimum wage unskilled immigrants and their families.
Surely the yield on real estate should be some 100 to 150 basis points over the risk free rate (say 10 year gilts?) you can work out the capital value of a property based on that value by inputting the rent into that equation. How do you get accurate and current rather than lagged “capital value” data into your calculations as “asking price” to actual sale price can have a standard error of 10-15%? It would be interesting to see commercial real estate expectations as retail real estate tends to follow commercial real estate values by (what used to be) 15 to 18 months. As with the stock market, future “expectations” of changes in capital values (similarly with inflation and stock market returns) are a big driver in real estate prices.
What is the mortgage calculator featured on this video?
the 2009 rebound was predicated on never seen before emergency policies of ZIRP and effective money printing. In 300 years, there was nothing like it. To expect anything like that to reoccur so soon after is delusional
A friend recently just bought a house for £150k which sold for 135k in 2018. The rate of growth is making it impossible for young to buy a house. With car insurance prices recently going up by 65% and electric and gas bills still high it's becoming impossible to have a decent standard of living on average wages or below average wages.
Interesting that House Price to Income ratio peaked at below 5% in 1989, before the 6 year decline in house prices, with the ratio plateauing at below 3 x earnings in 1996.
That ratio peaked at a staggering 7 x earnings last year. How low will it go this time?
The average house price index rose from 90 in 2009 (when interest rates were last at this level) to 150 today ie a 67% increase. If we deduct an assumed 2% annual inflation rate during that period, the increase due to artificially low interest rates would be around 25% to 30%. Hence, a correction of that magnitude is credible.
Thank you 😊
I wonder how the data deals with the fact that households now typically have two incomes and not one.
I think if things crashed and things were allowed to fail and mean-revert (as an unbiased system should), a >30% drawdown would be more than easily realistic. In any terms, somewhere between bailouts, higher wages and lower housing prices (nominal), lets all be thankful that houses will become much more affordable
From peak prices, Sept 2022, houses were 50% overpriced. Looking at Charlie's analysis, prices are already down 16%-20%. Momentum is building. We'll see another 25% in 2024.
To be honest Charlie's 35% seems modest now
I do agree.
In 2017 house price averages were £223,000 & that’s on zero rates.
What’s changed since then!!! Rates have gone up & wages have barely gone anywhere.
People are over looking the simple fact of supply & demand. Demand outstrips supply. Prices may well correct but i just don’t see an additional 25% drop coming.
If house prices fall 25% it won’t just be homeowners who are suffering
65% overvalued more like it. This was mainly caused by very low interest rates. To correct this, mortgage interest rate needs to reach around 10 to 12%.
Also a policy for new buyers who require a mortgage should by law have to sign a document stating the borrower have affordability when the rate is 12%
The Land Registry is so slow to report selling price, something like 8 months behind.
Interesting - I'd agree with you that 35% nominal seems too high given inflation, although 35% real falls seem perfectly possible to me. I think you also underestimate the impact of a recession on affordability - it cannot be assumed that a recession will have less impact than current high interest rates. Especially when combined with current negative sentiment on price trajectories.
yep 35% real is more likely if not greater.
In before the oil price goes crazy again.
Good video. Definitely overpriced by minimum 30% in London.
If the average person can't afford the average house prices need to fall
I'd be curious to know how Canada compares. I put a spreadsheet together recently just for Toronto, and median prices for housing have gone from 4-5x median income for working age adults in 2000 up to 15-20x today. It's a little nuts, and I don't know how it's sustainable.
We should be lucky we don't live there
@@flesz_ Well, you don't live there... but I do, lol. 🙂 Australia and New Zealand would also be interesting to look at - I have the impression that their prices have gone a little insane.
Population growth: Canada hit 40 million this year
@@joelkroodsma4903 so much bigger than UK and still 20m less
The MOST IMPORTANT thing you didn’t mention is the reporting time lag. Once reporting catches up, you’ll see that transactions being agreed in September 2023 were already way lower on price than anyone realises. 12-15% off the highs already, with worse to come.
None of the data in your video mentions this, and it’s arguably the most important thing for anyone considering a move to take into account in a falling market.
But thank you for your considered comments on my views! 😊
It seems nearly everyone notices your SCREAMING bias and lack of balanced information. The 15% drops you mention are based off a crazily inflated market and a 25% drop would still only probably take us back to pre-COVID prices, not really that crazy is it? Going back to 2019 prices?
Yes agree the massive drop would take us all the way back to 2018/19/20 when I don’t remember property being very cheap
Correlation with the S&P which is starting its trend down I recon. Interesting time
@@harleywilson4951 Charlie is literally the only person in this space who has made accurate predictions. Just because you don't believe it, doesn't matter. Of the 50 or so channels I kept a tentative eye on the last few years, Charlie is one of about 3 which has made the cut by accurately predicting the future.
How OVERVALUED are UK House Prices? = For me at least 35% otherwise I do not see young people come in work create families and actually create growth therefore pushing : innovation, happiness and motivation in the global economy. That situation will destroy almost all the economy of the UK . the Growth will be stopped clean and dry.
Depends on immigration. If the immigration is ok. Or foreign investors it will continue the demand. Population will start to decrease in maybe 10-20 years. Businesses want growth. And governments want growth. But it all depends on the labour market.
@@ImpartialDebater Other countries economies are in the poo, and this has reduced foreign investment dramatically. Immigrants are poor and don't buy hoses.
@ImpartialDebater I think population has already decreased more than we think. If you go to work and can't afford to buy a house or start a family what's the point in going to work.
Multi occupancy warehouse rooms are going for £900 a month in Hackney. Would u want to live with 10 people sharing 3 bathrooms?
Such low interest rates for so long was irresponsible.
Falling gdp is good. Endless growth is unsustainable and ultimately only benefits those in power. As people stop spending as much and borrow less, giant corporations and banks lose out whereas average people save more.
house prices need to drop 50%. i have a house ,it would mean if i moved the other house would be 50% less too. it affects rich landlords and people from outside the country who have invested in property. In Denmark, you cannot buy a house if you are not a citizen and their property prices like for like are 50% less than ours.
35% 😂. Think we heard this during covid. Well with rents where they are now, I’ll be buying a lot of BTL’s if that happens!
I watch these videos looking at multiple graphs and trying find a connection for prove the outcome the poster wants to make. No one mentions the most fundamental reason for a market price though, supply and demand.
Same
It is more supply and affordability. Demand is based on affordablity to a large extent. It has to be. If you cannot afford something, then you do not reasonable figure in the demand numbers. People currently are struggling with affordability and I think it will get harder next year.
If you can’t afford it, the banks will buy it and force you to be a rent surf
That isn't the reason. I read that for every extra two people an extra house is built. Supply and demand has been stable for 20 years. It's very low interest rates giving rise to historically cheap lending. The worst period being from 2008 to 2021 when rates were held at almost zero. At the same time, the banks create new money every time they loan you money for a mortgage which in effect devalues the pound in your pocket, making housing even more unaffordable. If you look at shitty 3 bed with a tiny garden, would you pay £580k for it just because it's a 'nice' area? It just doesn't seem worth it, you can buy two custom Bentleys for that. It's a completely manipulated market.
You’ll also find with inflation that it costs more to build a house, so if prices fall too much then new builds all but stop.
I think the biggest point you make is housing price crash is heavily region dependant, with the average drop being nearly 10-20% in London, but that is mostly less due to the massive investment in tower blocks all over the capital and these flats being sold at their high premium as the construction companies don't want to lose money etc, then you have ulez and other increasing costly factors. I find that surrounding areas are minimal at around 2-4% and many are thinking to move out of the city an commute in, and on top of that the lower prices naturally plus cost of commuting is becoming attractive again. I think your major cities will be the biggest hit but overall whatever is lost will be recovered within ike 5years anyway
High premium you say... 1 bedroom apartments for 300k minimum, it's premium on a whole different level..
Price of houses in North Ireland are still going up. They never came down
The last time we saw the Base Rate at or around 5% was in the few years either side of 2005, when 5.5 to 6 times price to earnings was seen. But there was no cost of living crises back then, and the Financial Crisis and Covid were unknown terms. I reckon with the Base Rate as is, and other things taken into account, 5 to 5.5 times price to earnings is realistic. If I've done my math correctly, a drop from 6.5 price to earnings to 5.5 price to earnings is a 15% drop. A drop from 6.5 to 5 would be 23%.
Houses became over valued for one simple reason, Gordon Brown deregulated the banks. Suddenly they were offering 5 times your salary, not 3, plus the banks who were meant to carry out their own checks and balances on people's declared earnings but never did. So applicants were being given huge sums of money they couldn't pay back to go into the market with and so began ridiculous sums being offered to out bid each other on houses. Result, massively over valued house sales. The winners, the mortgage companies. Saddling you with much higher mortgages than should ever have been. A scam pulled from day one by the city. And no one talks about it.
Right but the market is broken when home prices to income ratios are 7x we need a correction back to 3x in order to lend the very mortgages you are proposing. Higher wages and lower nominal prices seem to be the way forward. I think that this is a required correction because if a saver is earning 5% interest whilst house prices fall this will likely lead to a deflationary period which will be a very good thing. The cohort of people buying will be smaller as many took advantage of H2B and are stuck and cannot sell so volume will be low and demand for buyers will be much higher than before. Most current young people also have 9% extra tax coming from their salary ontop of 20% taxation. so if you earn 50k in London for two people (which is above the median) their after tax income is 65k combined so then you have to multiply this by 5 to get to 325k. So fair value for a 1 bed in london should be around this figure and we are seeing it begin to correct. Trouble is H2B reduced the amount of borrowing required by that couple by 40% so every property was valued at 450k-600k which were the H2B thresholds. Those days are over and the chickens are coming home to roost. The government should never got involved in financing of the housing market as it created this price distortion. A income required to qualify for a 600k mortgage is reserved for the top 10% of earners in london trouble is you had these properties available for people earning 40k with H2B so they have not got a cat in hells chance of selling it for what they bought it for an incredibly long time. Not only that but the government owns a proportion of the equity so when these individuals are forced to sell the properties at a loss this will create a further dent in the govts coffers ontop of the rising costs of sovereign debt.
High pricing doesn't mean over valueing. Not selling them means over valueing. Demand establishes value, failure to sell establishes over value
Whenever I look at prices they might as well make them infinity billion as that is equally as unaffordable.
How a 2 bedroom bungalow that should be worth no more than 50k have price tags of 500k is beyond me.
Where did u get those prijections from? As long as inflation is high those prices will go up anyway. Going short on short term dip is a great way to blow your wealth... Unless u know how to manage it.
Central banks know exactly what they are doing. Holding rates high to reduce the cost of their debt and invert inflation which gives them an excuse to cut rates. However, the question is… will something break first?
No more relief on mortgages, btl tax at income 1st. Then cost of goods are 15% more than back in 2019
Price's are not falling in the UK still
selling ,commercial unit's selling at a record rate in the North of Manchester.
Looking at this all i am wondering is how can houses be so incredibly cheap in the UK ?! In the Netherlands houses are still at 10 year salaries. Maybe i should sell here and buy me a cheap English house lol...
So I’m a bit lost in all this.
I’m 27, and have around 24k in savings. Earning just over 30k a year.
As a single individual, how realistic is it that I’ll be able to afford a house, here where I live in the South West?
Are you saying that thousands of people who bought house in the last 5 years will have negative assets?
What about renting market? Do you expect that landlords will higher interest rent will drop down rents?
9x income is outrageous. 3 times is bad enough but manageable.
The problem is most jobs can't pay the money needed to buy the house. So what are we going to do?
I respect this man.
Housing will still be expensive at 50% lower. It's not a useable asset as you need a home to live in so if my £400K house dropped to 200K it would still be beyond a 95% mortgage on a single 'Normal' range salary. BUT the suggested value is only of use when I die !!
So if inflation is running at 7% doesn't that mean that year on year if property price stays the same it is actually cheaper by 7% ?
I want them to drop more
near me deffinatly needs to fall, avg house price here is well over 300-350k, a family home 3 bedroom is over 450k here, its because we close enough to london to have high prices so easy travel to london. but far enough away that avg incomes here are not high. most people here are bearly over minimum wage. I want them to fall below 200k avg
Because of demand and supply, they may stutter temporarily but they can't drop in any meaningful way until new houses get built.
The current situation is more to do with a lack of affordability rather than supply and demand!
@@iantustin1983 Those two are not mutually exclusive
This year I've had a combined pay rise of over 17%. Next year I will get over 6%. A total of 24% over 2years. How are prices going to drop 30%???? Add the increase immigration and corporate buyers as well and there is no chance of this. It will be 20%again at most.
how far must the prices drop...??? try MIN. 25%
I said 20 percent at least , just that whee there is support on the chart
If the prices drop too much, investors will take them and rent them out. Personally, I'm waiting for them to decrease to buy one ot two more to rent and I am not an English citizen, I live in Austria. I love that houses in England do not remain unrented, we have the councils and benefits to thank for that. I own a property that I rented to a disabled person and the council pays me 👍
So the graph @ 4.10 is distorting the national average. Clearly " 9 x earnings " is NOT the average shown just a few moments earlier @ 2.40.
Praying for a deflation of house prices!
As a 23 year old in the UK, they need to fall more than bloody 35%.
The closest house I can afford to buy, with a "slightly above average" UK salary, isn't even in the UK lmao...
A significant fall is very unlikely, The UK housing market follows economics 101, Supply and demand. If you allow 10million people to move in and only build a couple of million houses, what do you expect, The effect on the Indigenous first time buyer market is disastrous, In 1993 I bought a very nice semi in Manchester for £30k less than 3 times my income, (it had been on the market for a year with only a few views) I moved in 2001 £60k 3 times my income. I would need 7 times income to buy those houses now, Too many people chasing too few houses.
It’s simple. The average wage is let’s say £35k (being optimistic). 3.5x the average wage should be £122,500 so that’s the price the average house needs to be. Until that happens I’m never going to be able to afford a house, and time is not on my side being 43 years old, it will be my kids who will be the house buyers the way things are going
I'm also 43 I think it's to late for us now. I did used to own a studio apartment but have since sold it. They told me it was a step on the property ladder but the value never grew like the prices of houses. I just got further away. My mum and dad both own their own properties. Both 3 bed one detached one semi detached. Dad's 82 mum turns 78 1st Oct. I only have a sister. So that's my only hope for the future.
I agree that a 1 to 2 bed house should be around 122k in the average areas.
You missing one point my friend, people tend to buy a house joining two wage incomes. And it tends to be 4 sometimes 5 times wages depends on the lender of course. But the average buying power in the uk is around 200k of lending plus the 10 percent you have to put down in savings to purchase which boosts the prices up on houses plus the house production is so shockingly poor
@jordangodwin2082 if you do combine two wage incomes it's fine as long as you don't have any children. That's where I went wrong.
1.) You don't understand the property market 2.) What have you been doing with your life if by 43 you haven't been able to buy a house?
If you remove inflation then house prices have barely moved since 2003. It is poor wage growth that has been the issue.
Hasn't house prices increased by 25% - 30% in the last two years?
This doesnt go back far enough, it focuses on recent interest rate changes. Look at house price to income ratio back to the 1950s.
None of this is happening in my county of Buckinghamshire. Average 3 bedroom house price where I live is between 380-420k, growth has been strong for the last 10 years thanks to Londoner's moving here and still working in the city and I fear with prices of houses will stay the same if not increase what with more Londoners now selling up as they feeling the pinch yet they still need to live somewhere.
House prices in london just keep rising... its horrific.
Experts are no longer required in Brexit Britain - lolz - Experts predict a house price drop of 5% to 35% - Normally you take an average so let's say a price drop of 20% by the end of 2024 - Depends on where you are - how the supply is combined with demand and of course mortgage affordability with interest rate rises - Since Brexit building costs have jumped 30% as material costs rocketed and lack of skilled workforce pushing up wages - Keep an eye on the property auction market for that tends to tell you more about trends - Interestingly the market has jumped to more cash sales as the banks get much cautious about mortgage lending. The trend to people staying put in their homes is set to continue with the extension & loft conversion market to carry on growing - Even basement dig outs for some are now proving popular however they are very expensive to build.
WE have stagnating wages, which doesn't help, and a tendency to look at wages in the nation as an average, not as a median, which means if the upper earners wages go up, that makes it look like people are earning more, when in fact, only a small percentage of people are.
couple with that, is the out-of-control, utterly deregulated rental market (along with airbnb), which has meant people who don't own are now no longer in a position to save, while their rents go through the roof and the amount of rental stock shrinks dramatically as landlords realise they can make FAR more money from short-term holiday lets than they can from long-term lets. Even people on "professional" salaries (ie £28,000) aren't earning enough to get on the property ladder.
We're basically being crushed from two sides.
Add to that, the fact that costs of every essential product and service continues to go up, while those corporations that provide them post massive profits and give their shareholders and upper management huge bonuses and dividends, AND the fact we don't tax people on their owned assets, only their EARNED assets, and we don't have enough tax coming in to offset all this with significant public works like council housing, or increases in other welfare state provisions.
We've let capitalism go unchecked for too long, basically, and we're reaping the whirlwind as a result.
House prices have already lost a fair bit, just on the basis that incomes have risen c 10% over the last 18months an house prices have dropped a bit.
The rise in inflation and interest is very short term, both will halve over next six months. Sellers know this and so are hanging on rather than selling cheap now.
House prices are NOT overvalued, pre covid, there was a healthy and average number of first time buyers coming onto the market. Also, the price is not only set by people borrowing. Many people buy without a mortgage.
You always show earnings against average prices, but first time buyers are not buying an average price house. Everywhere has starter flats for £130k and these are very affordable for anyone who puts a bit of effort in.