This is a bit of a controversial one as nobody has a crystal ball but do people see a correction or dip in the housing market anytime in the next couple of years? We’ve been persistent renters, mainly because we love the flexibility and lack of financial responsibility for repairs/maintenance. Living in London for much of our lives buying property was out of reach unless we wanted a 3 hour round-trip commute to zone 7 or something. I know a lot of people see it as dead money and in the long term, of course buying makes sense, but between agents fees, stamp duty, legal costs, interest and any repairs/maintenance, renting and saving/investing has always suited us. However, given that we very much don’t want to be paying rent into retirement, we’ve been reluctantly trying to get on the ladder. Which frankly has been about as fun as poking sticks in my eyes. ‘Sorry sir I know that property only just came to market but we’ve got 20 viewings booked already and 5 offers above asking price from people who haven’t even seen it’… We very nearly bought a place, until an electrical survey turned up thousands of pounds of urgent work that the Sellers refused to factor into a reduction. Why would they? There was probably 10 potential buyers waiting to jump on it. We’re now thinking of waiting a year to see what happens. Continue to rent, save, and revisit in 2023. However this is a risk as if the market continues to rocket, we may not be able to save at a rate to keep up. We only have a relatively small deposit. So, crystal balls at the ready… do we see prices levelling/dipping due to cost of living and massive interest rate rises? Or will the market continue to soar upwards? I know the press/‘experts’ are predicting a correction but it’s hard to get objective opinions when there’s likely a vested interest in one direction or the other.

@"Ernie1"#p22558 If interest rates get to 7%-8%, which I think is possible, the housing market can cool down. Elsewhere, I don’t think the inflation will go below 5%-5.5% in the foreseeable future. Edit: Let’s not forget ours’ suffer from serious supply-side bottlenecks for as long as we remember.

well, house prices are coming down a tad, but they shot up. we bought in the first housing boom and again in covid, so have always paid over the odds, our first house we bough 12yrs ago for £108k we sold 2020 march for £125k and a value now is £150k the house we bought a 3 bed semi - was bought in 2019 for £140k we paid £180k in march 2020 and a value now says £210k how ever the biggest jump in our area are the 4 beds, a friend bought in 2020 for £245k and its up at £350k now…but reduced to £335k and this is bacup

Thanks yeah I guess there’s always uncertainty whenever you buy. It’s knowing the prices have increased so dramatically in the past couple of years that’s my concern, along with rising interest. Frustratingly my industry has gone from ‘yay to remote working’ to ‘actually let’s be in the office a bit’, so I need to be within an hour of London, meaning houses aren’t cheap. The house I’m renting, a 2-bed Victorian terrace was purchased in 2019 for about £345k, our neighbours just bought theirs in 2021 for £400k, and it’s identical. £50-75k in two years isn’t uncommon round here. So I’m doing the math and thinking if a house we buy now is £75k above what it was, and that corrects over the next two years, just as our interest rate goes from 1.9% to 5% or something, that’s not going to be a great situation to be in.

Things are overheated at the moment. Not just house prices, but land prices. It isn't sustainable. As @"Cuprajake"#p22560 says, house prices are starting to settle/ drop in some places even. The land market is still high - but I can't see it lasting. Could well fall over in the next 12-18 months.

Consider where it is you want to retire to (assuming you won’t need / want to still be close to London) and buy there just now and lease out until the time comes you need it? Still a bit of a crystal ball situation - but gets you on ladder etc..

Prices have come back in the two biggest Australian cities, others to follow I suspect. Proprry in NZ (no, not Niche Zero) is doing the same. Rising interest rates and the previously overheated property market will almost certainly see a softening of prices, starting at the top end I suspect.

@"Ernie1"#p22561 My threehapence worth. Property prices do experience ebb and flow….but the ebb is when they either stagnate or dip slightly….this results in very few properties on the market and most of them absolute shite which no one really wants e.g. next to a motorway etc.. Then the prices start rising, people start moving again after a period of hunkering down….I remember talking to one person looking to move up, expressing dismay that property prices had fallen slightly. I said but that's a good thing as you will have a smaller total mortgage burden on the larger property..she said but ours will sell for less. Well you can't help stupid can you! Whilst they find ever more creative ways for people to buy e.g. Lifetime mortgages, 40%+ ownership+rental' etc… prices will keep going up. We are nation that says I like it, I want it, I must have it…how do I get it. Now wow, that's too much I won't buy it. Huge amounts of FOMO as well when house buying, especially for good properties. There may be a staircase effect on prices, but while demand exceeds supply…they will always go up. I don't ever expect supply to exceed demand. The affect is worse than it looks because there is plenty of pile it high absolute skyscraper shite on the market that people don't want to live in (the slums of tomorrow). Also a lot of houses squeezed in to make money, or tiny tiny apartments in blocks (often mostly rented) that are also not very desirable. So there is a lot less housing people actually want to live in than it seems.. I think buying a house is a sound investment. My first flat 31,500 (current value 325K easy. My house 159K, spent 112K over the years on it…Loft conversion , extra garden, annex….. current value 750K to 850K 27 years later.

I'm noticing fewer houses up for sale as people are probably holding out to see what will happen but demand is so high it means whatever does come onto the market is (arguably) overpriced. I'm not convinced we'll see a big drop unless either housing supply massively increases or the financial situation gets much worse and I don't think either will happen.

I doubt the market will go down (substantially) for two reasons: For one, prices have looked unsustainable for a long time - and yet here we are. (If you ever wonder how that works, when house prices are hard to manage even on generous salaries: Support from parents.) More broadly, the UK doesn't build enough housing units, particularly in London. Demand simply outstrips supply, keeping prices high. I think the only real change we've seen in recent years was a flattening in flat prices in London, as people were looking for houses during the pandemic ("race for space"). Perhaps higher interest rates (or some other reason) will change this fundamentally, but I wouldn't bet on it. Fewer people might be in the market to buy because of expensive mortgages, but that likely means fewer people will want to sell (and upgrade), too, keeping the supply/demand curve relatively level.

Housing market

Ernie1

Thanks all! Really helpful insights.

The help from parents thing is obviously a huge factor where I am. We’re very lucky to earn what I think most people (including me) would consider a very good salary, yet have only just scraped a 10% deposit and wouldn’t be able to cover mortgage payments comfortably if rates go much higher.

I’ve heard of multiple stories of friends of friends who’ve had very healthy sums handed to them to the tune of five or six figures which definitely makes it easier.

I’m not sure I’d accept a handout of that scale from my parents but I suppose I see why parents want to help.

The buying in a different area and let it to just get something on the ladder is an really great idea and something I’ll look into. It would have to be much cheaper as I know BTL mortgages are a bit stricter but I’ll do some searching.

Dusk

I always think ideally parents should spend their own money and enjoy themselves whilst they can but if they’re not the type to do that and are likely to die with a large estate, then why not gift it to your children earlier where they can get a greater benefit out of it. No point dying rich.

Being a parent of a young child I’m acutely aware that they may struggle to ever own a home so I’m already thinking about saving them a deposit.

Cuprajake

imo house prices only matter if your trying to flip quickly, if you’re in it for the long run then they tend to keep the price or loose very little.

Ernie1

Cuprajake

Yeah I think that’s the mistake, seeing it as an investment.

Staying put for 2-5 years+ is still a bit alien for us. Typically we moved once a year round London and we’ve only been in this neck of the woods for a relatively short while. It’s just the two of us and both work fairly remote friendly jobs so we don’t ‘need’ to be in one place.

If we could make peace with staying in one area for 5 years I’d definitely feel more comfortable about it.

-Mac

I can see another dip coming. We’ve just sold our house (we’re moving to Spain) for 40K more than we sold it for 18 months ago (when we had to pull out because of the COVID situation). Prices have been going up since then, but I reckon it’s only artificial inflation due to demand and people not wanting to get stuck in the same houses in which they spent COVID. With what’s going on with the UK govt at the moment, that’s going to lead to uncertainty and I think the economy is going to drop back to the same levels as during COVID, what with the cost of living crisis.

Just my 2p. I may well be wrong.

Elcarajillo

-Mac Where in Spain are you going ?

Important to sort out private health insurance as the Spanish NHS is more restricted than UK.

Also are you aware you can only use your UK driving license for a short time (6 months I think)

then you have to take a Spanish test.

omahabristle

Ernie1 I think one really frustrating aspect of renting is that you’re always paying a mortgage - it’s just somebody elses (plus profits), rather than your own.

I understand the hesitancy with staying put, but perhaps it helps looking at it differently: If you had your rent locked in for years and didn’t have to worry about price increases - would that make it worth it for you?

-Mac

Elcarajillo

Going to Chiclana de la Frontera, about 25 mins south of Cadiz.

Thanks for the advice. Yes, we do know about all that - we have English friends over there who have made the move and Spanish friends for local knowledge.

Platypus

I may be unpopular here but getting really frustrated by affluent middle aged second home owners gobbling up the market and driving youngsters into rented because they then can’t afford to buy. £800 minimum rent in our area (small two bed terrace with no garden) for one of our kids with a baby. Its a vicious circle, the rent is so high they can’t save and both have to work full time so child care has to be paid for or grandparents relied upon. I hope the government does something to make owning a second home less attractive . Rant Over!!

DavecUK

Platypus I fully agree with you. In fact they should change the law and only allow a married couple, single or cohabiting to own 1 home.

Ernie1

Platypus

100% agree. Completely.

We live in a street of Victorian terraces, ideal for first time buyers or families. One sold just up the road and became a full-time AirBnB and when I looked at the listing the owner has 11 (!!!) other listings nearby, another in the same street! So that’s at least two houses in one street that would’ve been ideal homes for someone gone for profiteering investors.

They’ve also converted it to sleep 4 adults so a street that’s tricky to park in at the best of times becomes a nightmare when 4 SUV’s turn up to stay. But that’s another rant entirely!

Second homes and holiday lets in clearly residential areas should be outlawed if we are serious about helping the housing crisis.

Cuprajake

Who do you think the stamp duty removal benefited…….those buying second and third homes.

Saved a packet.

DavecUK

Cuprajake And those moving upmarket, just to be fair and balanced

Cuprajake

Granted, we benefited from it when we moved,

But the price increase in houses Vs the saving from the duty…..

The property round near us was one of the biggest increases in the UK.

My area bacup/whitworth any house coming on the market was being bought by the same guy, a recent lottery win and he bought near 30 houses in the area 🤷

Rob1

Prices will crash. Possibly due to a number of factors: economically the worst is yet to come. The cost if living is going to get higher still, inflation will get worse, and interest rates will go up higher. Our economy is built on bad debt. The government gave loans to struggling leisure businesses during the pandemic (bars, restaurants etc) and these businesses are now being squeezed by lower income and higher running costs as people have less and less disposable income, and there’s still the matter of a gigantic trade deficit to resolve. People are going to lose their jobs and homes in droves. Who knows what’s going to happen with the buy to rent market, but I predict it will be made significantly less lucrative through taxation.

Add to that the global market, mainly the USA, where they are already seeing significant decline.

That’s my prediction, anyway. The market is just about past a state of euphoria. When you hear a house has been on the market for 5 minutes and has 10 offers above asking from people who haven’t even seen it, step back and wait. When there’s frenzy and a lot of greed, wait for panic to set in before investing.

Long term up, short term down. Long term being the length of the mortgage, short term being with the next year. I’ll be surprised if there isn’t a significant decline by the end of summer.

Cuprajake

See I differ with this.

They say the economy is stuffed, but only for those at the lower end of life.

Alot of business I speak to are rammed, I went to the local shopping mall rammed every weekend. So there’s money about. But there’s also alot of doom and gloom. I blame the MSM for that.

Alot of people did very well out of furlough and working from home too, so there is money. Just those on minimum wage who struggle.

Ernie1

I’m not a financial expert by any means but the perfect storm I’m curious about is those who have stretched themselves to the limit on overpriced houses coming to the end of their fixed mortgage term.

If someone bought a £500k house with a 10% deposit and got a 1% deal (not uncommon in the last 24 months), their payments would be about £1650 a month.

If that rate goes up to 5% (or worse 5% above base if they can’t remortgage) the payments are nearly £2700 a month. Even comfortable people are presumably going to struggle to find £1000 a month out of nowhere.

Salaries have been stagnant for a while now too and most peoples food/energy bills will have gone up significantly.

Elcarajillo

And ever was it thus, on several previous occasions people have stretched themselves to the limit,

only to find interest rates go up and often values fall. Mortgages they cannot afford and houses worth less than the payed at purchase.

It is not that long ago that I rates went to 15%

Mr Micawber !!!

DavecUK

Elcarajillo It is not that long ago that I rates went to 15%

In fairness it was about 30 years ago and part of a very bad decision by Major and the chancellor of the time. I think made the currency speculators a lot of money.

The real problem with raising interest rates to combat inflation….it doesn’t actually work, and I’m not sure it ever did (at least for the last 35 years). My personal belief is that when things are tough raising interest rates simply fuels inflation, especially when house prices are high multiples of salary, or loads are extended well beyond 25 years….as they are nowadays. Raising interest rates is a very lazy way to try and achieve something.

More creative ways to curb inflation are to remove certain things that make everything more expensive. One simple example is fuel duty. The genius Sunak cut 1p or 2 p or 3 p, or 4p but 5p off a litre and as the price went by more than 5p the moment he did it…it would have had no inflationary damping affect (and I’m not sure a 5p cut for everyone would have either). However, to have reduced fuel duty by a significant % e,g, 30% on commercial fuel, rebate on recpts, this would have a direct impact on prices of all the follow on goods and services, and probably cost a similar amount as the useless, but good looking 5p per litre deduction.

Our politicians and the central bank are lazy and lack creativity, one of the key things that should have been done 35 years ago was curb rising house prices. This would have been achieved by making it effectively illegal to offer a longer payment term than 25 years and a larger multiple than 2.5 to 3 times salary (single or combined). Enforcement of this would have been easy too, as anyone who was lent a higher multiple, by law could refuse to pay it. House prices then couldn’t have risen at the rate they have and people would not have got themselves in trouble, together with a big source of inflationary pressure removed from society. Instead people are in hock for 30+ years with a massive lifetime debt….only one group really gets rich from this.

dutchy101

DavecUK only one group really gets rich from this.

That’s precisely the idea. House prices are essentially a con / trick designed to fool the middle classes into thinking they have wealth. All prices are relative so unless you downsize or move to a cheaper area you benefit the square root of f-all from your house going up in value.

I bought a 2 bed mid-terrace in zone 6 of London in 2009 for £237k. We were moving last year but pulled the plug at the last minute. We sold it for £530k and have spent about £100k on it.

That looks like a nice little profit, but when you consider we have been paying a mortgate of around £1.3k a monrh for over 13 years and we still owe approximately £170k on a mortgage we’ll probably just about break even.

Prices for similar properties to mine now are about £600k so I’m glad we didn’t sell when we were going to borrow A LOT more and extend our mortgage to 29 years.

The plan is to get mortgage free now asap. Once we clear off our holiday this year I’m going to start hitting massive overpayments whilst I can. We fortunately remortgaged back in March at 1.39% for 5 years.

Low borrowing rates have fuelled massive price increases. The banks aren’t happy with their vast profits based on huge sums they have lent to homeowners (by creating numbers on a spreadsheet) - they now want to turn the screw on interest rates to win both ways. Keep everyone locked into debt for life.

You will own nothing and be happy

Elcarajillo

DavecUK In fairness it was about 30 years ago and part of a very bad decision by Major and the chancellor of the time. I think made the currency speculators a lot of money.

I know it affected me, dire times.😪

Cuprajake

Yeah I’ve never got the whole let’s raise rates.

If it were me and we had a ‘struggling’ economy then id drop the vat, go for quantity.

If you have to pay 20% on something. Only paying 10% would make people spend more, have more in their pockets etc.

Let’s face it all these massive billion pound company’s tend not to pay their way so why not help the little guys out.

My staff have had pay rises, I’ve not. For me it’s small business that always struggles, I’ve seen my energy cost almost triple since the first lockdown. And all my goods have had multiple increase.

My dad has a £1 jar of coffee from the shop, don’t ask. But even that has had a 25% increase.

These are not small increases, like wise the outdoor clothes dryer we bought last yr for £79.99 is now over £100

Ernie1

dutchy101

This is exactly the position my parents are in.

Mortgage paid, 4-bed house we grew up in in the middle of a housing estate. They hate it. Totally inappropriate for their needs now and not within walking distance of anything really.

The value has increased but can they move to a smaller house in the same area closer to shops etc? Nope, because those houses are the same price or more than the one they’re in. It’s not even a particularly pricey area so they can’t even relocate to a more affordable place, and even if they did it would be hundreds of miles from family and friends.

My other half’s parents never owned and currently rent a beautiful little house on the coast, their savings and pension covers the rent (well under £1000) and they’re happy as anything!

I’m still not sure I’d want the uncertainty and pressure of rent in retirement but it’s a good example of how home ownership isn’t always the golden ticket our society has positioned it as.

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