Economist explains why the UK's housing market as we know it is over
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- čas přidán 19. 07. 2023
- #housingmarket #uknews #economy
Fears are growing that Britain’s housing market will crash. With the Bank of England’s base rate expected to hit 6 per cent by the end of this year, there is good reason to feel concerned. Mortgage costs are soaring and fewer people are able to buy homes at all.
What’s certain is that there will be a fall in house prices, but by how much? How will these rising interest rates and mortgage repayments change Britain's housing market for good?
i Housing Correspondent Vicky Spratt speaks to Senior Economist Rachelle Earwaker from the Joseph Rowntree Foundation to understand just how much rising housing costs are likely to have an impact.
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Want to find out more about the trajectory for interest rates? Watch our video here: czcams.com/video/eAXeovEXLU0/video.html
The mistake you made in your analysis is you judged the housing market for the whole country using London as an example, the house price in other areas is far less and what you will see is London's bubble burst. This nearly happened in 2022 after covid when the trend for working at home increased but this trend will gather pace again soon because the economic advantage of not running a business premises Vs your competitor having to pay for one is too great. Anyone buying in London now or even in the last 5 years will be in negative equity for the rest of their life, sell now and move to an area you can afford because the end is coming for London's outrageous house prices.
@@purpleom9649 I think there are still far to many foreign investors willing to buy properties in London for the bubble to burst.
The only blip in the market is the Russian money no longer coming in.
@@JimT-RCT You could be right, crystal balls that work aren't yet here. Labour might well interduce higher stamp duty for foreign investors, what impact that will have? My bet (and this isn't just a hunch) the bubble will burst in the next 2 years and it won't just be a correction made up in the next few years like before, it will crash leaving Londoners who have bought in the last 7-10 years in negative equity that they won't be able to escape from before they die. There are many reasons for this 1) commercial property being freed up by working from home 2) workers not needing to be in London (and pay the high housing costs) because they work from home 3) the pressure of travel on car lovers and being forced to use public transport 4) Tec has made rural living far more attractive (this one is far to long to explain) 5) increasingly low-middle paid workers are realising pay isn't that less outside London and wealth generation in London isn't the same as the Southeast ie that people in London average about £100k whereas the Southeast is around 3x that. London has had it's day.
@@purpleom9649 I would add, another problem is the Fast trains. I live in East Kent, and because people can now get to the centre of London in under an hour, and property prices are lower here, we have seen a massive influx of DFL's. I don't blame them TBH. Of course, the negative effect of that, is it has driven house prices up here, as demand far outstrips supply.
@@JimT-RCT Lol, I am one of those DFL's living in East Kent. House prices saw a dip 70's onwards in East Kent but now they are just returning to where they were before the dip. It looks like HS1 will be the only fast link to London and as I mentioned London living is on the decline for people who are mid to low income. I spoke to my brother yesterday who lives in a million+ house in north london and he said the place has gone down hill and he is going to move out of London next year, just another up/down from London pushing up house prices. BTW people with money (DFL's) turn rundown areas back into thriving places and stop the rot, DFL's are very good for communities.
Back in the day, when I purchased my first home to live-in; that was Miami in the early 1990s, first mortgages with rates of 8 to 9% and 9% to 10% were typical. People will have to accept the possibility that we won't ever return to 3%. If sellers must sell, home prices will have to decline, and lower evaluations will follow. Pretty sure I'm not alone in my chain of thoughts.
If anything, it'll get worse. Very soon, affordable housing will no longer be affordable. So anything anyone want to do, I will advise they do it now because the prices today will look like dips tomorrow. Until the Fed clamps down even further, I think we're going to see hysteria due to rampant inflation. You can't halfway rip the band-aid off.
consider moving your money from the housing market to financial markets or gold due to high mortgage rates and tough guidelines. Home prices may need to drop significantly before things stabilize. Seeking advice from a financial advisor who understands the market could be helpful in making the right decisions.
I will be happy getting assistance and glad to get the help of one, but just how can one spot a reputable one?
When ‘Carol Vivian Constable’ is trading, there's no nonsense and no excuses. She wins the trade and you win. Take the loss, I promise she'll take one with you.
She appears to be well-educated and well-read. I ran an online search on her name and came across her website; thank you for sharing.
From my analysis, 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.
I advise you to invest in stocks to balance out your real estate, Even the worst recessions offer wonderful buying opportunities in the markets if you're cautious. Volatility can also result in excellent short-term buy and sell opportunities. This is not financial advice, but buy now because cash is definitely not king right now!
Anticipate rising home prices due to inflation, potential economic fluctuations, and Federal Reserve actions, emphasizing the need for expert financial advice amid uncertainties.
@@Kim.beneteau I need a guide so i can salvage my port-folio due to the massive dips and come up with better strategies. How can one reach this advisor?
The adviser I'm in touch with is "Camille Alicia Garcia" she works with Merrill, Pierce, Smith incorporated and interviewed on CNBC Television. You can use something else, for me her strategy works hence my result. she provides entry and exit point for the securities I focus on.
This reference seems valid.. Just looked up her full name on my browser and found her webpage without sweat, over 15 years of experience is certainly striking! very much appreciate this.
The fact that there is already an excessive amount of demand awaiting its absorption, despite how everyone is frightened and calling the crash, is another reason why it is less likely to occur that way. 2008 saw no one, at least not the broad public, making this forecast, as I'll explain below. The ownership rate was noted to have peaked in 2004 in the other comment. Having previously peaked in the second quarter of 2020, we are currently at the median level. Between 2008 and 2012, it dropped by 3%, and by the second quarter of 2020, it had dropped from 68 to 65.
You're not doing anything wrong; the problem is that you don't have the knowledge needed to succeed in a challenging market. Only highly qualified professionals who had to experience the 2008 financial crisis could hope to earn a high salary in these challenging conditions.
Actually, I'm not sure if I'm allowed to mention this, but I'd recommend looking up " Margaret Johnson Arndt” because she was a big deal in 2020. She manages my portfolio and serves as both my coach and my manager.
I read yesterday that Soros has dumped a load of holdings and is sitting on cash waiting for bargains. I must admit Ive got £80K ready and waiting if I see a bargain. I' can't be the only one waiting to swoop in on a great deal. I also think that prices will be pushed up by cash buyers if things start to head south - pushing it all back north.
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Mortgage rates are currently at an all time high since 2000(23 years) and based on statistics on inflation, we might see that number skyrocket further, a 30-year fixed rate was only 5% this time last year, so do I just keep waiting for a housing crash before buying or redirect my focus to the equity market
True, I mostly just buy and hold stocks, but my portfolio has been mostly in the red for quite awhile now. Unfortunately to be able to make good gains, you’ll need to be consistent and restructure your portfolio frequently.
@@TomD226 Impressive can you share more info?
@lowcostfresh2266 There are many financial coaches who excel in their profession, but for the time being, I employ Laurel Dell Sroufe because I adore her methods. You can make research and find out more.
@@TomD226 She has amazing credentials and a stellar resume, so I understand why she is so busy. Nevertheless, I planned a meeting with her.
Focus on equity for now as it will offer better growth, and then buy a house as soon as you have enough for a 20% (or 40%) deposit for a house.
I've been watching the housing market closely, Prices have been skyrocketing for years. It's going to be tough for first-time buyers to enter the market." how can one diversify $280k reserve .
I agree, It's not just the prices, but also the increasing interest rates that are making it more difficult for people to afford homes. With a good FA you can make up your portfolio.
The housing market has always had its ups and downs, but it's true that this time feels different. Having a portfolio manager will save you a lot in the market , My portfolio currently has 200% increase last couple of months with the help of my advisor.
@@PhilipDunk in times like these, it's crucial to be cautious and not rush into the market , Who is this your FA , my portfolio needs urgent attention , been a lot of lose.
There are many financial coaches who excel in their profession, but for the time being, I employ “Vivian Carol Gioia” because I adore her methods. You can make research and find out more.
@@PhilipDunk Found her, I wrote her an email and scheduled a call, hopefully she responds, I plan to start 2024 on a woodnote financially.
Inflation hits people a lot harder than a crashing stock or housing market as it directly affects people's cost of living that people immediately feel the impact of. It's not surprising negative market sentiment is so high now. We really need help to survive in this Economy.
I think I could really use more guidance to navigate the market, it is completely overwhelming, I've liquidated most of my assets and I could really use some advice on what best to invest into.
Your best option if you are unfamiliar with the markets is to seek advice or help from a consultant or investing coach. I know it sounds simple or generic, but talking to a consultant helped me stay afloat in the market and increase my portfolio to roughly 65% since January. For me, it's the best method to enter the market right now.
please who is the consultant that assist you with your investment and if you don't mind, how do I get in touch with them?
My consultant is‘’Christine Jane Mclean’’ I found her on a CNBC interview where she was featured and reached out to her afterwards. She has since provide entry and exit points on the securities I focus on. You can look her up online if you care supervision. I basically follow her trade pattern and haven't regretted doing so.
Thanks for sharing, I just liquidated some of my funds to invest in the stock market, I will need every help I can get.
We need to ensure that houses are homes first and foremost - not purely investment opportunities
Free market, can do what you want with money. Plenty of affordable homes out there , just no one wants to stay in them. Time people realised they need to spend more on housing and less on entertainment and bling.
How would you effectively separate the two?
@@coderider3022it's so far from a free market, that your comment looks ludicrous
Someone doesn’t understand section 24
@@tomjones8715 trying to infer.... you're saying because landlords now pay tax on gross rental income (rather than with deductions) that housing is no longer treated as an investment?
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.
I recently sold my home in the Boca Grande area and am considering investing a lump sum into the stock market before the anticipated rebound, couple of folks have been discussing a potential May rally, speculating on which stocks may experience substantial growth during the festive season. Do you have any insight into which stocks these might be?
If you are new to the market, I recommend seeking professional assistance. The most effective approach to creating a well-organized portfolio is to begin with a professional who is knowledgeable about the turbulent yet profitable market.
Over the past three years, I have been working with an investment coach who has provided daily guidance on my investment decisions. With their expert analysis, I have realized gains of over 850k. Their insights have helped me avoid losses and capitalize on market breakthroughs, particularly during downtrends.
I'm intrigued by your experience. Could you possibly recommend a trustworthy advisor you've consulted with?
My advisor is ‘’Catherine Morrison Evans’’ she’s highly qualified and experienced in the financial market. She has extensive knowledge of portfolio diversity and is considered an expert in the field. I recommend researching her credentials further. She has many years of experience and is a valuable resource for anyone looking to navigate the financial market
Managing money is different from accumulating wealth, and the lack of investment education in schools may explain why people struggle to maintain their financial gains. The examples you provided are relevant, and I personally benefited from the market crisis, as I embrace challenging times while others tend to avoid them. Well, at least my advisor does too, jokingly.
Investors should exercise caution with their exposure and exercise caution when considering new investments, particularly during periods of inflation. It is advisable to seek guidance from a professional or trusted advisor in order to navigate this recession and achieve potential high yields.
I subscribed for a few trading courses but it didn't help much, been getting suggestions to use a proper financial advisor, how did you go about touching base with your adviser
Through closely monitoring the performance of my portfolio, I have witnessed a remarkable growth of $485k in just the past two quarters. This experience has shed light on why experienced traders are able to generate substantial returns even in lesser-known markets. It is safe to say that this bold decision has been one of the most impactful choices I have made recently.
Wow, that’s stirring! Do you mind connecting me to your advisor please. I desperately need one to diversified my portfolio.
I’ve actually been looking into advisors lately, the news I’ve been seeing in the market hasn’t been so encouraging. who’s the person guiding you?
The UK housing market is a ponzi scheme plain and simple. It works as long as the next buyer comes along with a freshly minted mega mortgage. However when that mega mortgage is no longer available then the music stops and someone does not have a chair.
Not just the housing market, its lending in general. People buy investment with loans all the time, Elon brought twitter with a loan.
@@pupip55 Borrowed against assets though, right? If the assets will appreciate at a higher rate than the loan interest, that the right decision surely?
@@dw300 A home isn’t an asset, it’s a liability, even when fully owned. Look to the enormous amount of capital fixed in homes to see the lunacy in fixing something that if liquid may return actual income, not a virtual paper appreciation. Economic growth, GDP, includes housing, so increasing prices give a fake growth economy. Those who are career focused play two idiotic games. They increase their mortgage as their income rises buying status homes. They then leverage the appreciation for more status items. Ordinary people face hard times. The better off face financial Armageddon.
@@dw300 Yeah your are right, The interest rate is very low for billionaires. However it inflates the market, as they are willing to pay more then the actual value.
@@brynleytalbot778 a home being a assest or liability depends how you use it, But for most ordinary people its a liability. same with boat/yachts.
One of the hidden penalties of spiralling house prices is the opportunity-cost for other investments. People who are putting their capital into an asset "as safe as houses" are not putting that capital into investment in businesses that are providing jobs and growing the economy.
People keep saying that to me.
I will never put money in some stupid fly by night business.
I will run them but I will never have an assets in them so if they fold all the vans and tools etc are still mine.
A business isn't real it only exists in your mind .
A house or a block of gold that's real. That's the only thing I consider as banked. Anything else it's still in casino chips as far as I'm concerned.
That has genuinely never occurred to me. Such a good point. Are there stats to back it up?
@@markgrundy7517 I don't know. But there's only so much capital to go round, whether we're talking individual investors, or the likes of pension funds who could also be tempted away from corporate investment by high growth in house prices.
@@avancalledrupert5130 Everybody has to make their own choice. Investment in real estate only works though if the returns are sufficient to cover admin costs, maintenance, insurance, etc, and the growth in value is sufficient to at least cover inflation. But yes, I do take your point; if a business goes pop you're left with nothing as an investor, whereas at least you can go and live in the house!
The economy as a whole though needs a balance between those who take the safe option and those investors who are prepared to take an element of risk. In a way there's an irony in fast-inflating house prices. For those buying at the top of the market the over-inflated prices actually work to make the "safe as houses" investment a potential loss-maker.
Not really true, I work in construction and many people spend tens of thousands on their property purchase. Which is investing in business.
Greed absolutely destroys everything! In the 1950’s a 3-bed semi was 2.7 times the average annual salary, today’s it’s more than 8. A reasonably nice car was 2.4 times your monthly salary, whereas today it’s more than a years worth.
A man could afford to support his wife, send 2 children to university, drive a nice car, and live a happy, healthy and prosperous life…. and all on a single salary income.
Greed destroys! The richest 1% have taken so much from us; they won’t be happy until they’ve acquired everything and we own the square root of zero. 😡
Best comment
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you've remind me of what someone once said "The mind is the man, the poor is in it and the rich is it too". This sentence is the secret of most successful investors. I once attended similar and ever since then been waxing strong financially, and i most tell you the truth..investment is the key that can secure your family future.
I urge everyone to start somewhere now no matter how small, this is literally the time for that, forget material things, don't get tempted,i became more better the moment i realized this.
yeah investment is the key to sustaining your financial longevity but venturing into any legitimate Investment without a proper guidance of an expert can lead to a great loss too
exactly! That's my major concern and what kind of profitable business or investment can someone do with the current rise in economic downturn
Hello nice comments here, please what exactly kind of investment are you talking about here, I'm really interested too
I've been hearing that UK house prices have 'never been this high' for the past 25 years, yet they've kept going up. Given the strong culture of home ownership and the mindset that one needs to do whatever they can to own a home in the UK, coupled with successive governments' propensity to shore up the housing market with schemes like Help to Buy, it would take an external shock that the govt does not have pocketbook to combat to bring house prices down meaningfully.
Agree - but suggest that shock is the elderly care system. Councils are massively in deficit. Wealthier families (self funders) have to shore that up. All of that drains cash out of inheritance, removing available (inflationary) capital from the housing market - and increasing deflationary pressure (when you're having to sell fast to release capital to pay for care, you can't hang around for months or even years waiting for the ideal sale price).
@@skewwhiff9423 Whatever the shock is, I think most people (including those who own property and are reasonable thinkers) will welcome the readjustment to UK housing prices that is needed to bring them back into sync with what is reasonable to expect people to pay to put a roof over their heads. Commentators and politicians talk about 'affordable' housing and 'market' housing as two separate things, which I agree is the reality of today's housing market, but do not agree that it should be. If 'market' housing is not 'affordable', there is a problem! Even with the increased cost of food nowadays, we wouldn't be talking about 'market' food prices and 'affordable' food prices - there would be riots on the streets if that were the case - so why do we accept 'market' and 'affordable' housing as two distinct and separate goods? Successive govts have contributed to the growth of the monster that is UK house prices by dreaming up schemes like Help to Buy to prop up the housing market. Such schemes have merely made the market more unaffordable by creating demand that would not otherwise have been there.
@@edwardt2417 this is true - and while some will end up with negative equity, as a longer term proposition it's something we should welcome for the security of future generations. The Thatcherist hangover that - the market will self-regulate, an equilibrium will arise - is all well and good when all factors are level and humans behave as rational economists (which New Labour did nothing to address). But factors constantly shift and humans aren't rational. Selling social housing was a short-term get rich quick con-trick. And sure, some people did very well out of it. But that's the politics of individualism over community. (or - look! Benefit cheats, while I'm over here fiddling my taxes and taking cash in hand - I'm grafting!) It needs regulation to combat 'give me the cookie now' human irrationality. But the idea that lack of poverty benefits everyone in society has been lost in the story of adoring wealth beyond measure. An added deflationary pressure on the overall market will be from commercial property. Although, on the plus side, those half empty office blocks could be repurposed to social housing (once the price has corrected and councils can buy them at reasonable cost to the tax payer). Perhaps a lurking variable here is pension fund exposure to commercial property - there's a vested interest in the illusion of wealth to keep prices high so people get their nest eggs. But chickens... roosting, etc. It's all
How dare you want to own your own home!!!
@davidalexanderheaton2812 the bloody nerve I have!
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As a young person I bought a house when interest rates were 7.25%. In those days you could only borrow up to 3 times single income or 2.5 times joint income. Had those .conditions remained house prices would not have risen to their present level. Interest rates rose to 15% during the term of my mortgage leading to widespread default. Low interest rates are a comparatively recent occurrence and coupled with more flexible lending have driven up house prices.
The housing market as we know it isn't really over. The 'economist' didn't really say anything that wasn't completely obvious.
I remember my parents going through several issues in the last housing crash, and nearly loosing their home. So I've always been careful around the mortgage, when I bought we were offered 4 times both mine and my wife's annual wage. We decided to buy using one wage, so that we wouldn't be over stretched if ever the market changed for the worse. We had managed to save a big deposit, and so now due to value increasing we can weather any storm in the next few years. The problem is a lot people stretched themselves too far, when rates were practically zero. A price crash is coming, the old saying what goes up must come down, prices have risen for so long that the bubble is close to going pop.
the obviouse you could save live off one wage it not the norm
Nope and it wasn't something could always do. I was made redundant in the past and we were down to one wage. So we learnt to manage with one wage for awhile whilst I was out of work. We make sure we never over stretch ourselves in regard to the mortgage. An issue a lot of people have done because interest rates were so low for a long time. So if by by chance one of us finds themselves out of employment, we can manage just about. @@kangaroo1888
Except house prices have never gone down really. In 2008 they went down like 15%, but they'd been going up 5-10% a year for several years before that. Same in the 90s, prices fell back but not more than 20% and it took five years. If you took 20% off house prices right now you'd barely be back to pre-pandemic levels.
You did the right thing being cautious, absolutely. But the idea that prices will fall back has kept a lot of people from the market as they 'wait for the perfect time' but that time is never coming.
Very wise.
@@pickyourteethupoh but they have, when looked at in real terms the average price didn't recover to pre 2008 levels until 2022 peak. I know shock horror right?
Mis economist is forgetting one important aspect in this situation: inflation, the house prices did’t go up, the value of the pound was eroded when we printed billions of pounds during covid. Astonishing that economists don’t understand how economy works
Modern economists have a habit of overlooking the basics.
Wages and non-house costs have gone up generally in accordance with inflation. Indeed what wages will buy in terms of holidays, cars, white goods and technology is way ahead of where it was when I was a child (1950-60's - no phone, no fridge, no central heating, dodgy car, one UK holiday a year). However the house price to wages ratio has gone way up, so house price inflation is grossly in excess of wage inflation. There is no easy answer as social housing, which used to act as a backstop, is hollowed out.
@@petermartin5030 old stock was sold off privately and money raised by local councils was meant to be reinvested in to new housing stock. This never happened. Was some of the politically motivated. I think so
Correct…Personally i save in physical Gold for the long term & that has worked fine for me..
biggest issue is that many morons claims that 0-1% interest rates is good and its NORMAL cuz it was like this last few years ignoring 10 times higher for century
I’ve have been hoping for a housing crash for decades but it never seems to happen. The whole system is stacked heavily in favour of landlords and both parties keeping tweaking it further. Housing is an essential commodity so it is insane and immoral to keep promoting rising house prices and rising rents.
It’s not that mate. For the last thirty years we have not built enough housing to match the increase in households. The increase in households is a result of immigration and more single person households. The issue is particularly acute where there is the greatest increase in households and the highest incomes. Couple that with historically low interest rates as described here plus expectations of continued price growth and you have the situation we are in. What would help is a lot of high rise apartments principally for single people in London and elsewhere
UK houseprices HAVE crashed, to a significant extent, measured in USD, and also in recent times relative to inflation. We are way off the peak in relative terms, however as we've all got relatively poorer both internationally and in terms of income vs inflation, also relative to current interest rates, they don't really feel any cheaper.
@@tomk8729 in the clip she said they were at historic highs, highest for 200yrs. The metric was multiple of average wage. That is an inflation proof measure. You may have noticed, but wages have been going down relative to house prices since I was born. Look at MPs, all of them house properties, none of them genuine wage owners.
@@tomk8729 They haven’t crashed as you allege. They have just gone back to where they were a year or so ago. Looks pretty certain they continue to drift down but interest rates are still pretty low by historic standards and compared to the number of households there is still a massive under supply. Unemployment is low and wages are rising so a dramatic decline looks unlikely
@@tomk8729 if you think it's gone down in USD terms, measure it against B T C. House prices have plummeted in B T C terms. And still people ignore it 🤦🏻♂
The UK's population has risen by over 8 million since the millennium, supply and demand dictates high prices, maybe we need to stop the supply of people.
No prizes for guessing where that should start.
Yes, I questioned why she didn't mention that. Then she said that she worked for the Joseph Rowntree Foundation and that answered my question.
Yes population growth is a factor, but we already have a labour shortage which is constraining the country's growth, so the solution it's not as simple as you assume. The supply side should have been kept up better, but it is complicated.
@@ubermod5564 Don't agree, if 7 million added to the population hasn't sorted the problem out, how many more millions will?
And what are all these so called jobs that mean we need endless immigration?
@@ubermod5564if wages have not exceeded inflation then we have too much labour.
I was in the property business for years and have seen several down turns including the 90’s when over about 7 years prices dropped about 40% as interest rates soared. But what underpins the market today is the huge shortage of supply, and that is the really important factor in this down turn. As a result prices will drop but they won’t drop as they did in the in the 90s. How far they drop is of course unknown. Even to economists!
Except the in the 90's house prices weren't 9-10x earnings. The tax burden was also different, with a much older population now. We also have the care crisis and families being forced to sell homes to pay for care. All those things combined suggests that property prices could fall a lot more than in the 90's, despite the supply/demand argument (which is mitigated to some extent by empty investment properties). However, they probably won't - because it's such an emotional issue - whatever gov't of the day will probably emergency borrow, do some sort of bail out and we'll kick the issue another 25 years down the road.
@skewwhiff9243 - except the government can't borrow much because interest rates are too high. If they borrow more it will just increase inflation, and the BoE will respond by raising interest rates further.
1/25 people in the UK are landlords. That's the fat that's about to be cut out of the economy.
@@fakename45 yes, I guess depending on which model of inflation is currently in vogue and how the pertinent factors interact with the landscape of the day. We don't yet know how climate change will impact scarcity, although we should have a reasonable idea that the era of cheap food is over. Additionally, black swan shocks such as GFC or Covid tend to facilitate unique responses that were hitherto thought of as reckless or impossible (and certainly in the case of QE, put more money in the hands of the wealthiest, increasing wealth gaps).
@@skewwhiff9423There is no reason to believe food prices will g up due to climate change its been predicted by people who only know about weather and nothing about food economy. Food production has increased year on year without interruption.
With a rising population and a low number of houses being built prices are going to rise in the long run, simple.
Even if people can’t keep up with their mortgages and sell, that’s a short term drop. And they then add to the demand as they still need a new home.
The amounts of investment properties is also exaggerated.
The biggest problem with the housing market is properties are so badly built, they are unlikely to be worth anything by the time the mortgage is paid off!
with the way we import people the land will be very valuable. You can always build a house - you can't build land.
A house is a place to live. Period.
Thanks for the info .. wink wink .
my friend told me about this stuff
Unfortunately on an island like the uk 🇬🇧 it is not just a place to live, It’s also a store of value, it’s an asset because it is SCARCE. Wake up 🆙…..the law or supply & demand is universal
What we should definitely not do, is change the acceptable norm to have intergenerational mortgages. Or mortgages that need more than two people to pay them off.
OK but what ARE the alternatives then? Mortgages used to be so much shorter when they were first introduced to the public, they were never supposed to be even 25 years long. But what is the alternative to having mortgages made much longer, or even interest only for long periods of time, if the alternative is for large numbers of families uprooting themselves to rent in the awful private rental market we've now got ourselves lumbered with?!
@@justthecat7 Build millions of new homes. Lower prices. Lower the debt to value ratio. That or have your grandkids emmigrate to canada and europe and australia en masse, for a better governed country.
@@Hession0Drasha Canada and Australia suffering the same problem. Policy for volume building can only do so much, as the volumes won't get built unless govt intervenes.
We need more public housing. We need to tax land use/unproductive hoarding.
@@justthecat7 lower the population is also an option
@@InfinityIsland2203 A very sound one.
We are at the limit of *house price to wage relationship*, BUT more and more houses are being bought by capital/cash to be rented out. If the buyers think they can exploit higher rent, house prices will continue to increase (but salaried workers will never be able to buy)
We're in dodgy territory. Greed got us here, greed wont get us out.
you mean the rich are buying them to rent out
Yet house prices are dictated by the marginal house. Currently the rich are buying because house prices always rise. However the number of rich people are small and when the market turns they will be unable to hold the tide. In fact it will exacerbate it as one of the first things to happen will be that professional property developers will have their funding cut to take account of falling prices which means they will not be at the property auctions which means that the sales will be full of amateurs which can result in reposessed properties being dumped on to the market.
@@davidwalsh6608 as a counter point (not suggesting you're wrong) with many investment companies so cash rich since 2008, many of these homes are bought out-right, with no debt attached. And as houses start to dip in price (say 20% discount on today's prices) more will be bought with cash. They can then afford to wait out any crash, relying on the rental income? Or have I got that wrong?
Inequality is so much worse than in 2008, that the 2008 dip won't be as exaggerated ?
70% of property is bought with a mortgage in the UK. The idea there is some massive market of cash purchases that will cushion prices falling is as big a fantasy as that there is a shortage of property.
To suggest 30% is not significant is delusional. OP is suggesting that the mortgage free purchases could potentially be a bigger proportion by, for example, offshore money looking for a safe haven. If prices drop, these (long term) cash buyers could quite as easily see UK housing stock as cheap. Buying the dip as the saying goes ..
My parents literally forced me to buy my first house when i was 25. I had a good job, saving’s and paid the mortgage off in 6 years.
I’m 55 now and will be eternally grateful for their advice all them years ago!
The average 25 year old with a good job now will be unlikely to get on the property ladder. Check your privilge.
@@francesbrown6990He's not showing off. No need to be a dick about it
paid the mortgage off in 6 years? how much was the house £50,000? haha
@@The.Toaster houses, particularly outside of London, were significantly cheaper 30 years ago.
My parents bought their house in the 90s for just a £2k deposit and it's been long paid off. This was in the West Midlands and I can't remember exactly how much the house was back then. I think it was 20-30k.
@@FahadAyaz 20-30k 🧐 really?
House prices always go up, yes. But over the last century as they went up and down, they have always been about 2 to 4 times average yearly income. Right now they are 10 TIMES average yearly income. So yes, it is particularly stretched right now.
Unprecedented low interest rates forced prices up along with government incentives that were eaten up by price increases making them pointless, unless you’re the government for whom economic growth, GDP, is your focus. There is also the buy to let sector who are dumping stock as fast as they can. HMO’s are, for now, safe, but if property prices collapse who will need to share unless they’re constantly mobile with their job.
Lucky for us in north east that's not the case we have some decent affordable housing around double to triple annual income althought ours is 6 times the value luckily we bought at auction and did the work so we could afford it
A big problem in the UK is that the graduate salaries / junior role salaries have not kept up with inflation. As an example a place on a Tier-1 employer’s graduate scheme in 2003 in London paid almost the same as in 2023 it’s only around 10-20% increase in salary over 20 years. Similar for many jobs. In that time house prices have more than doubled and are still held up by the shortage of property, growing population, international investors and buy-to-let which is still profitable for people with capital. The wages need to inflate dramatically so that people can afford houses, food, etc.
The issue is new money only enters the market from debt, asking for increased pay while at the moment there are declining demographics for the next decade of those aged 30 to 20, those buying houses, it would be a difficult sell. Demographics of a lot of countries are going to mean 50% of their populations gone by 2100, due to old age and as I say the only way money enters the market is through debt so if you lose 50% of your customers, where is this new debt/money coming from?
The graduates aren’t up to much cop! They don’t stand up to thier chinese, German and even american counterparts.
Yeah coz government spends printed money out of control. And nobody produces with new technology. And somehow people are surprised by inflation.
Supply and demand. Graduates are no longer rare, desirable or that employable and there's lots if them so unless they increase productivity (they wont) then the best course of action is to not become a graduate.
@@ianc7866 In fact there's a scary amount of PHDs in Post-Colonial Queer Dance Theory degrees. And half of them going into government administrations.
Your house is only worth one house! Doesn't matter how high your property values goes up
my friend told me about real estate. hate it
Not if you sell it and go large it up in SE Asia somewhere LOL
This video assumes that houses are purchased by normal people. Most purchases nowadays are buy to let or cash outright, about 65%.
Lots more people are buying on interest only, or making the term much longer.
House prices will not be allowed to crash, the investment asset rich class that pull the strings won't allow it to. The govt will stop step in with mad stamp duty holidays and guarantor schemes.
Yes, gravity is a myth too. Some are in denial phase. Thud....
B2L has been wrecked by Tory tax changes and more difficult regulations for landlords
Possibly it is 65% but where dose vast majority of this cash come from? Hint, people who buy first time without cash.
@@FreaksSpeaks look historically and around the world, having large sections of the population own a home is not always the case - it doesn't make properties cheaper. This video assumes that as average people can't afford a home, prices will crash but, the likely scenario is that the majority of people will rent from the wealthy, as is normally the case.
I would guess that it go the way of car finance - less ownership but lots of creative finance products.
I believe you’re correct. Financial Institutions like Lloyds Bank are becoming property owners. Search “Lloyds rental”.
Yes I believe this time its different, we have pushed prices to the limit by holding interest rates so low for so long, the recent boom in the pandemic was just a form of collective madness. A whole generation has only known ridiculously low rates and prices were trending to infinity, it cant continue, the housing market is unsustainable in its current form
Agreed. Our real challenge is with a normalisation of interest rates (to approximately where we are now) requires house prices to drop 35%-40%. Alternatively we need about 5 years of high inflation and stagnant prices to bring things back into line. I suspect a combination of the two - we have already had 15-20% inflation (and wages will follow over the next 2-3 years), and we will see about 20% drop in house prices.
Different from the recent past, but it looks very similar to the crash of 1990, which led to a decade of negative equity. I had just bought on a 100% mortgage...fortunately, I had a good income, and a lodger. When I moved for work, I let my property and rented. Unfortunately, with the current letting rules, rental supply is diminishing, just as more will be needed.
@@cacwgm The repeating signs are the marketed fear of never getting on the ladder and shared equity ownership, both major drivers of the 1990 crash. We’re doomed to repeat our mistakes, never learning from history. After seeing at least two major corrections in my lifetime I’m seeing the signs of another through history repeating itself. Youth, focusing on the future, fails to look to the past, so, sadly, they pay a heavy price.
First house I paid 15.75% in 1990 and that makes you somewhat careful. I have serially paid off my mortgage as I moved from house to house. Ten years ago I could have afforded to buy a £3m house - instead I lived in a £600k house. Too many people who never saw what interest rates have historically been. Interest rates are now normalised - they are not high. Sadly, we haven’t even begun to see where this goes, and how bad it will be.
15.75% of £50k as opposed to 5% of £500k.
@@MrSize14feet Well 15.75% of £78k actually. But let’s inflation adjust those numbers…£183,500 of mortgage according to the BoE inflation calculator (for a 2 bed Victorian cottage) on a house that in inflation adjusted terms would now be £200k. That house now is worth about £350k now (Zoopla), so let’s take some scaling - that would require us to get to 9% before we match equivalent rates. All of that is irrelevant as the interest rates should be (in the long term) around 5% (BoE) and 6-7% (mortgage) so we are just now reverting to the mean.
Good for you now shut up.
If people saw two similar houses on the same street, and one was on sale for twice the price of the other, they would look at things differently. Effectively, that's what's happened. I bought an average terraced house early in 1989. A friend of mine brought a house in the same street just 4 months later. The difference was that she needed two jobs to afford it and never had time to enjoy being at home, or the money for basic repairs to the house. If you add to that the increasing number of people who get loans for double glazing, and even buy furniture on HP the debt is never-ending.
Car pricing is just as crazy, but at least people calculate the running costs and how much they are going to use the car.
I imagine you are wondering what would have happened if you'd bought that £3m house. People able to afford properties in that range are less affected by inflation than most of us. Clearly you would have made a considerable amount of money had you bought that property 10 years ago, even selling in today's market. Oh well, better luck next time.
This has happened many times before, it is a repetative pattern in the U.K. Also, house ownership in the Uk is not as secure as you think. I was made redundant and the government "offered" to mortagage my already paid for house for me ( according to their choice of deal) and if I failed to make payments, difficult when you have no job, they would sieze my house. When all the money was gone they would then put me and my family in a council house and force me to live in abject poverty. Even though I had been astute, paid taxes, and paid off my mortgage at the age of 42. So I departed from old blighty sold all my assets and live abroad in a much better environment. Have never been better off and never looked back. PS I live in a muchh bigger haouse than I could ever afford in the U.K. problem solved!
'I was made redundant and the government "offered" to mortagage my already paid for house for me ...' Why would you need a mortgage? ' When all the money was gone they would then put me and my family in a council house ...' If you make yourself intentionally homeless, the council has no duty to house you. Your story sounds like a fabrication and people should not believe your fiction.
Good for you
Thailand or Europe?
House ownership isn't secure if you decide to sell it?
@@Purple_flower09 No, if the government forces you to mortgage an asset that you already own instead of paying you unemployment benefits. The only ones benefitting from this scheme would be the banks, who apparently have a never-ending list of ways to get people's money.
overseas investors are also part of the problem, buying up houses in London and other places, not to live in just as investments, you don't even need a visa. it all feeds into low supply of housing and until that changes the demand will always be higher. If the house prices crash the overseas investors will have a field day as cash buyers
Part of the problem is we are building houses for overseas investors. If we were building modest family homes to buy and rent and maybe micro homes for single people to rent I can't see billionaires rushing to buy.
Part of the problem is this obsession with London it's for the rich get over it
Greed is the issue and why house prices are where they are at.
When homes become investments ... instead of actual homes ... we've lost our way.
Sure, supply and demand go a long way to house price differences - and you could be cynical at that point and consider whether the housing stock was kept deliberately low in order to push houses as investment rather than homes - but it's really hard to prove that.
Personally, I think that's exactly what has happened. A deliberate strategy to hold back the building of the amount of houses we require in order to maximise profit.
Supply and demand - keep the supply lower to increase the demand to make prices rise = some people get very rich.
If the UK went on the kind of building spree required by the population for homes, not for investments, the market would crash.
So, in this current economic environment of high interest, cost of living, wages not increasing to match, it is _only_ the shortage of available houses keeping the market from tanking.
The interviewer commented that interest rates are high...this is not so. Interest rates of say 6.6% are not high when inflation is 7.9%. Quantitative easing pushed down interest rates and pushed up asset values. When the correction comes (fully), it will have dire social consequences (which were entirely predictable). The absence of adequate social housing and the reliance on a broken private sector will create an extreme social crisis.
This is it in a nutshell. It is a good interview, but so much more to it that they missed.
It’s not that they’re high now, it’s that they’ve been absurdly low for 10+ years. A normal rate around the late 80s was about 8%.
Houses are NOT assets - not if you need a mortgage to buy one. Paying that mortgage is paying down debt and nobody should forget that.
They have been for a few people. It needs to be properly regulated. Buying second homes (and should be penalised more heavily for every extra home you own) for private letting should be hugely penalised.
Yes, but the magic of buying a house is that you use the same income to provide shelter AND build equity for the future, rather than having to choose between, say, rent and savings.
Personally lost a shed load in the late 80’s managed to buy again in 2000 & lived like a pauper to pay my mortgage off..glad i did…feel sorry for younger people now..
Jealous much?
Well done. You don’t really own your own home until the mortgage is paid off entirely . The bank owns it . I slaved like a dog to pay off my mortgage working 85 hours a week for about eight years to make capital repayments and clear the debt . Basically I didn’t see my forties : because I worked night shifts in the end I looked like a ghost , but I haven’t paid a mortgage for over 20 years now , and I know I shouldn’t say it but my house is now worth about a million quids . You don’t own your house until you’ve cleared your debts . Every last penny
'Experts' always reference the Pandemic as a factor in everything when it was truthfully the lock down and closing of economies that is the key factor.
Printing of cash…..caused a rise…..
Actually, my view is the massive debt burden, added to the inevitable interest rate increases , as predicted by the continuous 36-40 year cycles that always occur. The pandemic was the match, but the paper, firelighters, twigs, branches, logs, and tree trunks were already there waiting to be part of the burnout.
All part of the WEF's Great Reset - which Charles - Sunak - Truss - Trudeaux - Ahern etc etc are members. Planned Worldwide Economic Collapse is needed before their reset.
You don't see or hear the MSM investigating this !!!
UK has a debt of more than 100% the national income. Enough said.
@@Paul_C ...in which it is far from unique.
The perfect storm happens when a fixed rate mortgage comes to an end at the same time the government is raising interest rates to fight inflation. That is when monthly payments can triple.
We should have 25-30 year fixed rate mortgages like they have in the U.S
That would be sensible and a common sense solution. Our government and banking system aren’t either. With mortgage rates at lows disposable income is at a high so the economy grows and people status buy into properties beyond their immediate needs. Fixed rate mortgages would work if people had fixed to one home for that term. In the UK people want to have their cake and eat it so they’d want to remortgage low and abandon the fixed rate long term loan. Avarice inflates the market, and then fear. Buy during avarice, dump during fear.
Not just the US. France, Germany, Spain, Sweden, Norway, Japan. Etc etc. Those countries also don't allow Russian investment, encouraged by the corrupt Tories.
@@randypanthegoatboy2Japan isn't a great one for that list. Their houses become worthless when their old. But otherwise yes great point.
@kylekeenan3485 Japan actually has mortgages tied to your job. You work for a company and they pay your mortgage for you. As long as there are strong labour laws, its a good idea.
@@randypanthegoatboy2 We had that in the UK. It was called a tied house, or cottage, owned by your employer. In Japan mortgages are passed to the next generation due to the absurdly high prices of property. It’s hardly solved property prices, it’s just passed the problem onto the next generation.
The lunacy is that so much money is tied up in a liability giving the illusion of economic growth when that money can’t be put to better use elsewhere. Why a liability? Cash gives a bankable return. Property doesn’t, unless you count not paying rent, which is a mortgage repayment for the landlord, or interest on their initial investment, or the investment you paid for with thirty years of rent. The last shows the absurdity of renting privately and how the transfer of wealth occurs, which is UK government policy, favouring guess who, their core voters.
The only solution is to treat property as a home, and an entitlement, within reasonable boundaries, not a lifetime of paying down a mortgage (death tax) or rent (servitude). That takes a massive crash into sane prices and a societal upheaval back into traditional family values where single occupancy was a rarity.
Do we have a housing shortage or the progressive societal engineering into one by pushing sole occupancy as a goal? And then there’s the ideology of mobility regarding careers. Absurd when you consider localised economies once provided opportunity and the green lobby pushes them for reduced reliance on long journeys, as do planning authorities. All in all, when you step back, ascend to look over it all, it’s chaos by design.
Houses should be places to create families, nothing more, nothing less.
it might be bit controversial but I like to use houses for shelter, too store my personal items or even play games.
Seem a bit expensive to buy a house to just have sex.
@@pupip55 It's to raise a family in. Russian bot.
@@SK-yb7bx damn my cover is blown beep bop
The housing market consumes too much wealth in the UK. Money that should be going into pensions to be invested into British companies to improve productivity and wages has instead been diverted into unproductive bricks and mortar. We need prices to come down by 30-40% as a minimum for society to be balanced.
everything was perfectly fine - until around 1980-90s purchasing a property stopped being the same thing as buying a car and started being an investment
people should be investing in economic growth - lending money to growing companies
not on pumping property bubble that doesnt create any growth of the economy
not a single job gets created out of the fact the house that used to cost 30000 now costs 250000
If banks paid a decent interest rate less people would feel the need to risk their capital buying houses for rental. These artificially low interest rates are like turning all the lights at the intersection green and have caused the biggest mis-allocation of capital in history with all its associated unintended consequences like ballooning asset prices. It will take a long time to correct.
Blame the Bank of England and quantitative easing for that one. Banks will only offer rates sufficient to get deposits to fund the lending book, anything above that just loses them money. QE puts lots of funds (cheaply) into the wholesale market
replace central banks with ai that maintains the cash rate at always 2 percent above the inflation rate, no one in government wants the bad look of recession, image has caused this mess
Why would they raise rates when low rates lead to more house purchases? Banks benefit massively off of this. They rake it in while savers are left with very little to show for it.
I've got a 6% saving account with my bank now. Best before Covid was 0.5%.
The whole business of property transactions in the UK is Vile. The rotten lot of solicitors, estate agents, and conveyancers should be disbanded as they exist to jack the price of property skyward.
it’s so confusing how they’re smiling whilst saying all of this
that's the chattering class, politely phrasing the grinding away of our collective lives with a smile
I found that irritating too. Talk about tone deaf, if you're going to deliver sombre news then do so in a suitably sombre tone, you don't grin throughout like a giddy idiot. I expect these two are totally insulated from any of this though so couldn't give a fuck.
The key reason for house price appreciation, as with all assets, is the debasement of the currency in which they are denominated in. It is highly likely that the debasement of currency continues as central banks around the world monetise their government debts which are ever increasing. This puts an upwards push on house prices along with all other assets. This point has to be mentioned in discussions such as these. It is an arm wrestle between currency debasement vs income to asset price ratios plus interest rates.
My worry is that - because of a high demand for housing - prices won't actually fall, but the cost of borrowing / rates will stay relatively high, compared to previous decades. This will mean making regular high loan-to-value mortgage payments impossible. So, save larger deposits, right? Except, large deposits will also be impossible to save, because of high rents eroding saving power.
I'm 43, single, and a hopeful first time buyer on a UK average income. If I do manage to scrape together the deposit, I'm faced with a 25 year mortgage (because anything shorter is unaffordable). That means I'll be paying my mortgage into retirement. How is it in any way reasonable that I should be potentially shut out from owning a home in my early 40's?
It's not right maybe we should all move to the usa instead
Don’t stay in the UK.
I think you're on the right track, go for it, buy well, source a fair mortgage and terms, the alternative is rental and if you dont you'll miss the boat completely. Yes, its scary buying and you'll only know that you've made the right decision a few years later which beats paying for a rental in the meantime. Alternatively, go off grid and build your own house, be brave you can't go wrong or be happy renting well into your retirement, which is very scary.
That is the reality! House prices aren’t going to crash like the experts are predicting but borrowing costs might remain high for the next couple of years. I am predicting that house prices will only drop by 15% in London and 5-10% outside London.
Just sold my house and had 18 viewings and 4 offers. We are not in London either but the south east. The demand has dropped, but houses coming to the market has dropped too so the demand is still there and with less choice you still need to offer reasonable amounts.
When Britain used gold and silver as money 1821-1914, there was no inflation for 93 years, and by 1914 a house cost just 2x the average wage! Debt money is the problem.
Very good conversation using simple and precise language. Thanks. The only thing you did not touch on was the now historical significance of a booming housing market and strong UK economy. Rishi Sunak whilst Chancellor implemented a stamp duty freeze to kick start the economy during the pandemic.
With this 'shot in the arm' removed, growth in the UK looks like being anaemic a long time to come.
Britain has for decades diverted capital away from industry and into this low productivity area.
House price inflation is inflation as well. The country just lurches from one mess to another and is in need of new leadership.
It does not follow that Labour will be any better as during their 13 years from 1997 to 2010 they did nothing change our direction of travel.
All part of the WEF's Great Reset - which Charles - Sunak - Truss - Trudeaux - Ahern etc etc are members. Planned Worldwide Economic Collapse is needed before their reset.
You don't see or hear the MSM investigating this !!!
There was some decent economic growth during some of the New Labour years but it's correct they didn't do anything to change the fundamentals of the housing market. Although the UK economy was stagnant for the last 8 years we were in the EU, there was a chance of turning that around when we were in the Union. There is no possibility of reversing the relative decline outside the bloc so I share the gloomy prognosis.
. Yes, the more bureaucracy and over-regulation, the better, completely agreed. If only we could put the EU inside some other supra-organisation with more bureaucrats, legislators, and regulators, and then get ourselves inside the whole thing, things would be fantastic.
I believe there will be a short term correction but the laws of demand and supply will dominate and sadly successive governments of all parties have failed to ensure there is adequate housing to meet demand. Rental properties are in particularly short supply and high rents and insecure tenancy make even higher mortgage costs palatable by comparison. Interest rates peaked in the late 80s early 90s and many feared entering the property market following the crash. Property remained in short supply and prices have ballooned since then, even before the low interest rates since 2008. They even continued to rise following much greater affordability demands and deposit requirements for new mortgages. In 10 years we will likely view today's house prices as a bargain!
Remember that we're at the tipping point now where generations below us will be smaller than us, and this will likely continue for generations to come. Population collapse is already been discussed by demographers.
This generation of first time buyers are in the unique position of being massive relative to their parent's generation AND their children's generation. So, lots of competition for houses, with less people below to support them as they age.
I would predict house prices to be falling in real terms over the next 50 years.
House pricing has rarely been left to market forces. Values are falsely inflated due to vested interests. When people couldn't afford to buy, instead of prices dropping, institutions found evermore creative ways to get people into more debt for longer. And lest we forget, they were doing us a favour!! NOT... This 'normalisation' or 'correction', 'fall', 'crash' of the housing market will have to be harsh enough to put prices within reach of buyers - or are they forever to 'own nothing but be happy'... Personally I'm waiting to hear what the new raft of lender schemes will be and how they will disguise the unaffordability! But then some of the largest lenders in the UK have registered themselves as landlords - See what's coming...
We are one crisis away from house prices rising again and reaching all time highs.
This mainly affects high LTV mortgages and low income households.
Unfortunately personal finance is not taught in school, so hundreds of thousands of people have made bad decisions when buying houses.
I'm glad solving the area of a triangle is not a concern.
I would recommend anyone watching this to check out Gary’s Economics for a contrary view: basically income inequality means wealthiest have to invest excess income and so will continue to buy assets from the middle and working classes. This will drive prices up. I don’t know which view is correct but the two opinions both need to be looked at IMO.
I think Gary’s take on it makes more sense to me
My parents scraped to buy their first house, a doer up, for £1500 in 1959 with a deposit of all their savings of £150. Project inflation to today and that would be like tryin to buy your first house with £2000 deposit for a £20,000 house, so short by a factor of at least 5, because of excessive house price growth relative to salary.
the average house price in uk is now £244,000 not £100,000 cheapest dog hole place in a dodgy area is about £80k but no one would want to live there anyway.
@@italianstallion9170 That's right, short by a factor of 5 to 12. Yet renting doesn't solve the problem either because rental costs are also factored by house prices and mortgage interest rates.
Looking at average wage and interest rates for 1959/60 they appear to be £728 and 7% (base rate) respectively (from Google search) which equates to a house price twice annual salary which looks about right. If we use average salary of purchaser (today) around £30k that would equate to £60k for a house in 1959 equating to monthly mortgage cost of £424. Using interest rate of 0.5% (note I'm sticking to base rate for simplicty) and average house price of £230k (just prior to mortgage interest rate rises post covid) then monthly payments would have been £816. This why we need two people to pay the mortgage today whereas in 1959 it would have been one. Clearly to get back to an affordable monthly mortgage payment either house prices or interest rates or both will need to come down substantially.
my dad was a teacher, bought his first house with my mum in 1987, a large 3 bed. If a teacher was to try to buy today, they earn ~£32,000, they can borrow 4.5x their salary, that's £144,000, say they had a deposit of £20,000.... so overall can afford a £164,000 home.... this does not exist in the South East, I am not sure if you would even find a studio apartment for that price.
it should still only be 3.5 salary.@@footyball66
The safest way out of this, which also seems to be the path we are currently on, is to have little or no nominal reduction in house prices and instead let the real value of houses decrease due to inflation. We've already seen inflation take 15% off of real house values in the last 18 months or so. Over time, this erosion of real value will make houses more affordable for first-time buyers, without creating negative equity problems for recent purchasers.
not without wage hikes to match the inflation.
@@meisterlymanu5214 im no economist but wont that just exacerbate inflation and put extra strain on businesses, worsening recession
Either wages go up by 50-80% or house price crash by at least 80%, yes those who have excessive debt will go bust, but they would go bust either way. No chance you will pay off excessive mortgage over 20-30 years with no hickups in personal life or economy, but everyone else who wants a family, simply can't afford a home, even on salaries of 200-300k / year when you substract rent say in London, its not much left to save and so you go in a circle, always paying higher taxes, higher rent and no investments for the future.
Housing is NOT a free supply-and-demand market. It is driven by manipulated interest rates, usurous credit, foreign investment, immigration policy and building regulations. It is designed to be a mechanism to blackmail working families into compliance and extract every possible penny from their pockets. They know they have maxxed out house prices and instead of lowering them they are responding by maxxing out rents. The UK now has the highest rents - pro rata - than any other country in the entire WORLD. Just think about that for a moment - those who can no longer afford to buy can no longer afford to rent. There is no conceivable excuse for these policies and yet ALL the major political parties in Britain are in favour of keeping this shit show going as long as they can.
House costs are not correcting, the cost of ownership remains the same or higher. The change is that banks and rich lenders are now making the money rather than the owners of houses.
What is happening helps no one other than big lenders and people with lots of cash that can buy without mortgage.
I’m 27. Have a degree in engineering, arguably one of most difficult degrees to get. And I cannot afford to move out on my mum house hahahahah. For ref been working for 2 years and save about 800 a month. A cheap 2 bed in my area is about 180k. Salary x 4.5 is the standard for a loan.
You’re an employed engineer living at your mums but can only save £800 a month? Something doesn’t add up here 🤔
@@adamski6312 Spoiler: Salaries aren't that high in the UK even as an engineer.
Spoiler alert: we reinvented serfdom, we just relocated the lord status to landlord so the chattering class wouldn't be able to notice it.
@@lawrencium2626 "we"
@@adamski6312 only? lets break it down. i'll leave it up to you to see what an engineer earns with 2 years experience. rent/bills = £400 (which is very good compared to what others pay). car insurance = £80 car petrol = £160 food = £120 phone = £20 gym membership = £35. that's £815 already... me saving 800 per month is a huge amount. its almost half my take home pay
As with virtually every single conversation on this topic, this debate is heavily referring to London and the SE of England which sits apart from the rest of the UK housing market, this extreme imbalance of house price versus income is not as prevalent elsewhere.
yep, north is even now realistically priced, prior to pandemics, it was even more realistically priced i would assume.
The simple answer to that is to steer clear of living in the South East. The place is heavily polluted and generally overpriced anyway. Anyone with any sense lives west of the Tees/ Exe line.
@@Belfreyite exactly, it's the same for those complaining about renting yet expecting to live in prime location and not pay a fortune for the privilege. Some people just have disproportionate expectations as to how far their money will stretch where housing is concerned unfortunately.
All my Cousins and colleagues up North own homes, not the same for my friends and family living in the South East. It's a shame.
Speaking as a renter in my mid thirties I say: BRING ON THE CRASH!
Hell yeah
A crash is about 10%.
Would that even help you buy?
Good luck though.
It’s not the be all and end all owning a home
One love
seriously better off making a big plan B and leaving for a cheaper market, like spain.
As a landlord bring on the crash because with price crash comes a supply crash = recession only way out of a recession is to increase population lol been in this business all time makes my laugh listening to two kids who know only how to repeat what they hear on CZcams.😂😂😂😂😂
Genuinely struggle to imagine a weaker analysis based on speculation NOT real data. There's so much missing from this it is crazy!
It’s all going to plan for 2030
People like doing predicting whats going to happen in the economy, but there is never an audit into how accurate this endeavour is. They can predict and be wrong and still keep their jobs.
that's what you have to do to get respect by the media as an economist. All the economists that make tangible predictions that often reflect reality of the market, and the reality of the SCHEMES that keep it all afloat - they get put in the "boring" box, you barely hear fron them. Having a degree in economics is like having a degree in art, "unless you cater exclusively for wealthy people, we don't need you."
So many TV programs emphasise that a house is not a home, but a "property", this is to encourage continuos buying selling purely as a means to make money.
The fact that so much of our economy has had money funneled into this unproductive renting market is absolutely depressing. High levels of rent vs ownership kills ecnomic productivity.
they said this in 2008.
And the fix was to slash interest rates.
Which is why we're in the mess we're in now....
Wrong. UK property market is highly internationalised. London, for example, is the money-laundering capital of the world. This means the old link between earnings and prices no longer exists. There is almost an unlimited amount of hot money that can flood into UK property. More new homes just means more landlords and investors. The only solution is for workers to earn much more pay in relation to the cost of housing- AND the restoration of MIRAS [mortgage interest relief at source] has been urgently needed for the last 20 years- but we keep voting for politicians who are all "in" on the property swindle. Since 1999 they kept ordinary people out of property by devaluing their wages and savings with low interest rates. It worked - the new class of BTL vermin made an absolute killing - they are all now laughing from the comfort of a tax haven jersey/Isle of Man etc etc. And yet we keep voting for morons. I think, politically, we've gone back to the 1940s or 1950s. It is a social disaster.
Absolutely right. I have seen apartments over built in my area advertised to international buyers with zero locals able to afford. They are built for investors.
@@a6703 it’s everywhere nobody says nothing.
This is the same in nz, canada and aus except the rates correction is going to have some level of effect.
Housing bubbles exist and have always done. This isn’t an exception
This is so accurate, it's shocking how few people understand this. How we resolve this is the real interesting conversation.
London was international. Maybe not as much now. I doubt international investors will be buying up semis in Skegness or terraced house in Middlesbrough. Not unless they've lost all sense
in the UK we still have a fundamental problem of housing supply, and until this is fixed long term prices will stay high
we have an immigration problem
A good critique of where we are now, for those poor souls who purchased an over priced ' pandemic ' property 2 years ago, and then offered even more than the crazy asking price......... then borrowed more than they should on a sub 1 percent 2 year fix............ god help them.
House price to wage ratio has rocketed in the last 30 years. An article the other day said that buying a house will be for the middle class and above. Greedy people have driven the market and keeping low income earners down.
For those that say get a better job etc, who do you want to serve you in a restaurant or look after your parents in a nursing home?? Go figure.
It's not greed it because the British public just except low wages for the past twenty years
The house prices to income ratio is influenced by several significant factors that heavily impact prices. These include limited housing stock, population growth, decreasing new supply, resistance to excessive construction, foreign buyers, and the accumulation of wealth among certain segments of the population who can afford to make even more purchases. While it might be tempting to hope for a continuous decline in prices, historical data suggests otherwise.
However, it is essential to acknowledge that an economic downturn of great impact like the 1930s depression, could potentially lead to a significant impact on housing prices, though it remains uncertain if and when such an event might occur, but levels of personal and public debt in the Western world suggest an event such as this can happen. At that point, other factors may become less relevant as the broader economic situation takes precedence.
You fail to mention were 80% of that population growth comes from; immigration policy.
Exactly@@anonanon7497
I think what is missing here is an honest more positive conversation about the housing market overall.
Wages are going up, mortgages let you 4x your salary increases. There have been some large pay award recently, in the past few years.
We are running a multi decade housing supply deficit, there is no supply and hasn't been for some time.
Why would you move to another home at the moment, you'd stay in your 5 fixed mortgage at 1-2%. So there are very few houses on the market to buy, new home builders are now slashing new starts so less new home are now entering the market.
Finally if rates do fall, at all, there is a mountain of people who will jump at the chance to purchase a home as they have been waiting to do so through most of their 20s.
The real story is a growing section of society cannot afford to purchase a home in their 20s or 30s, and we need more afford apartment living arrangements in our towns and cities to support this cohort.
I am in my late 60's and as a small time landlord I have always been interested in the property market, particularly investment residential units. It has amazed me that prices have just continued rising at a rate higher than inflation. There are quite a few reasons but the main reason is that of supply and demand. There are more people looking for a house(or flat) to live in than there are homes available. So prices rise in terms of buying a property or renting one have continued to rise. The population is still growing faster than houses being built. There are areas in the country with empty properties, but these are areas with low wages and too few jobs - so young people move south to where the jobs are. The governments have allowed property to be bought purely for investments rather than 'living in' (Empty London properties and Air BandB, holiday homes). These have reduced housing stock considerably. I think there is a drop in value and adjustment over the next few years. But no 'crash'.
1414141x how many properties do you have? What is small time?
Crash has always been the wrong word more like a slide and we aren't even halfway through this one and it will only gather pace during 2024...people keep talking about supply and demand but it's irrelevant if there is a lack of affordability and the days of cheap borrowing has gone and wont be coming back..crash slide correction whatever you want to call it with a UK predicted to stagnate over the next 3 years whichin reality is likely to become a recession a steeper fall in house prices is more likely to happen.
Enough for a comfortable retirement but I am by no means rich. I consider small time to be 5 or fewer investment properties. Above that and you start to get in the professional league as you can live off the income without working.@@jayangli
If we look at inflation, a house purchased for 45000 in 2014, is now equivalent to 63000. So technically house prices haven't gone up the value of money has changed. Bank of England stats
one of the only people in this comment section who get whats going on. well done
Average English house price in 2014 was £200,000. In June 2023 money that is £263,000 using CPI. Average English house price in March was £304,000. If you use an inflation index that includes housing, well yeah.
What matters is price to earnings, which is higher than ever.
I'd take this with a pinch of salt. I'm becoming more skeptical of 20 - 30 something experts who have never experienced enough cycles of our global economy. If you listen to the likes of Warren Buffet vs most 30 something fund managers you'll find contrasting perspectives.
I'll take that with a pinch of salt. I'm becomming more skeptical of 50 -70 something experts who have never studied enough cycles of total civilisational collapse. If you listen to the likes of Emmanual De Rouge vs most boomer economists who only really experienced the mid to late 20th century on, you'll find contrasting perspectives.
Both excellent comments. Thank you for your salt.
We have this same issue/debate every few decades ... the buzzword in the early 90s was "negative equity" only we didn't have social media to create the same panic then ... but yes, house prices will drop, there will be a bit of a correction, but they won't outright crash because the reality is there is a shortage of housing, so wages will rise instead. People will start moving jobs for better pay offers, wages wil climb and gradually house prices will balance out again. They'll dip, they won't crash. Having said that, in reality and in general, the only people who benefit from high house prices are banks and estate agents, so if it is going to crash, bring it on!
It seems to me that this supply and demand issue in the uk regarding not enough housing for everyone to mortgage or rent is intentional by the government to keep rent and mortgage prices high . Surely there's enough wealthy property developers applying for land to sort this problem but permission is only granted from government and denied based on the numbers they have on the system. There must be plenty of land available and property developers. 🤔
p.s most economist are never Billionaires!
Most don't live in the real word either and its rare to find one that agrees with another !
The issue with housing lies in their transformation into financial assets, artificially inflated in value by banks and real estate agents. It's crucial for everyone in the UK to have the opportunity to purchase a home in their desired location. The situation is exacerbated by landlords acquiring affordable properties and then renting them out, leaving people unable to afford a home for themselves. This trend could lead to a substantial decline in the UK's population over the next two decades, resulting in fewer births, insufficient caregivers for the elderly, and strained public services. Reflecting on Japan and South Korea's experiences could offer insights, as the UK appears to be headed down a similar path. Unfortunately, the government has yet to effectively address this pressing issue.
The elephant in the room is the arrival of non-UK born adults, the majority of which don't work but are housed in council houses, subsidised rental properties and so on.
People can piss and moan about inflation, but the increase in house prices correlates with the New Labour elimination of our borders, of which this has gotten worse every year and shows no sign of slowing.
Last year alone, 1 million foreign born adults settled in the UK. Not only is this ensuring that no hard-working individual can own their home, as well as the eradication of our countryside.
@danieldurchtechnik6804 😂 you believe this rubbish, I'm sorry but it's the English who don't work they're either too wealthy to work or on benefits. Go and see more of the world
why is it crucial that everyone - even the poor - have the opportunity to buy a home ? Since when was home ownership something that was ordained by God?
@@garethwilliams4467 Someone's been reading the WEF handbook I see.
We'll own nothing and be happy?
I am sure that it is in The Book of Leviticus infact that we must all become slaves to landlords and be susceptible to being homeless at the drop of a hat.
What you have said is ridiculous. I have children, I want to leave them a bit more than a tenancy agreement when I go to the thereafter.
If people have got into too much debt tough luck. They need to lose the home. Only by doing that you will get a proper correction and make houses affordable.
What these people fail to mention is the empirical costs of creating a new house. Quite an important omission
Uk doesnt produce enough property according to increasing population .they stop people everywhere to develop new houses..
Unfortunately minimum house price will be £1million in london around 2030
And where is the demand coming from seeing the UK native population isn't replacing itself? Pro migration or Pro Green agenda. You can't be both.
that's why we should stop the increase in population - encourage contraception with women, stop out of control immigration, encourage people to return home, and cut child benefits to stop people having kids they cannot afford bingo no crisis.
Don't live in London.
Hate this “build new houses” argument. New houses are being built all over green belt constantly. And they cost upwards of £250,000. That doesn’t help first time buyers.
Also, you get generations aren’t having kids so where is the demand coming from? It’s coming from the fact that properties are being boarded by landlords and holiday lets.
Move to usa instead
The property boom started after Maggie Thatcher introduced the 'Right to Buy', allowing council house tenants to buy their council houses. Most who did soon sold up to move up the ladder, and this sparked a huge rise in property prices.
this was a quick run through of what we know already, I thought it was going to suggest what was going to replace the housing market that is now supposedly over?
We have a housing supply issue 100%, but we also have this cultural plague that everyone has to own a home and as a result people are going into home ownership will less than an ideal deposit. It used to be a recommended 20%, but people aren't moving to buy, they're risking it all with tiny deposits in the expectation that interest rates would remain super low.
A combination of this means we will see people lose their homes. Maybe not this year, but as more and more look to refix their mortgages between now and 2025 that number is going to rise and rise. Inflation is slowing, but we've got another year left, interest rates won't fall for a while. So many will see an expensive mortgage rise further. Renters will be hit by profiteering landlords because they'll pay 20%+ above the actual monthly payment the landlord needs, landlords could seek to sell instead and rental prices will rocket.
I'd predict we'll see no improvement until late 2026 unless hundreds of thousands of houses are built and these are affordable. South east where they mentioned, a one bed flat can cost 80k-100k minimum, so 16k decent 20% deposit. No chance of getting a 3 bed house for less than 350k and very few will have 70k ready for a decent deposit. Just madness at the moment. We'll either see a housing crash or migration up North.
Negative equity has just started coming to people's minds
More people own their homes outright than have a mortgage. Only a tiny number, usually first time buyers will be effected, the overwhelming majority will be ok, although their equity may be reduced.
@@jjefferyworboys8138- Lots of people moved house during COVID whilst house prices were way higher than they should’ve been and interest rates were way lower.
So it’s not just first time buyers that are in trouble at all. It’s the people that wanted to upgrade while money was cheap, not realising that interest rates can go up too.
Negative equity is only an issue if you need to sell, so for the majority no issue at all IMO.
@@soibiddulph8215 - There’s thousands of people who upgraded and bought for the first time during COVID. They will have to sell if their fixed period is ending soo.
@@Station9.75 that's perhaps the case, but the 2 issues are separate. Not everyone who bought at the top of the market will have to sell, it depends on how far they leveraged themselves.
Is there a way where I can live and not pay somone who inherited this peice of earth rent
Yes, it's called a camper van or motorhome.
A lot of big expensive house are now going up for sale on Rightmove. Their owners know full well that a massive property crash is fast approaching and want to cash out before the big pop finally happens.
They will sell now, then hoover up rock bottom repossessions afterwards. They’ll put these 1/2 and 3 bed homes onto the rental market and reap huge rewards from individuals who’ll probably never end up owning a home through out their entire lives.
You might call them smart investors, but at the end of the day they’re just creating misery and destroying ordinary hard working people dreams and long term aspirations.
When serious civic unrest inevitably breaks out, they will suffer the biggest and most severe wake up imaginable.
I've been hearing this since 2008, I'm still waiting......
@@terrancedactielle5460 Yea, and I’ve been hearing warnings about mass uncontrolled immigration and failed integration since the 1970’s, now look how that’s panned out?
Rents are rising and house prices are falling, that’s a well documented fact. A storm’s coming, be ready or be gone! 😱
50% house price crash coming as mortgages against wages have never been so high. They are going to lose money when the house market crashes as it has to because prices are unsustainably high.
You might need to take a look at Australia if you think the prices can't go any higher due to price to income ratio.
?
Absolutely spot on. It’s easier for me to buy a house in London than it is to buy in Sydney. I actually think prices will keep going up. Wages will rise in a post brexit environment and everything will cost more. Including houses.
@@dc1dc153 Whelp... when you've got a housing bubble in a country of over 7.6 million square killometers, you know summat aint right...
Crash is an over dramatisation often used by lay people in the context of falling assets. All "crashes" are just market corrections whether its stocks, bonds, real estate or currency and market corrections are normal. The housing market is long overdue a very large correction and even though I own my home outright I would welcome a correction of 30% or more to help more younger people get on the ladder. 1st time buyers are the life blood of the property market.
Very gracious. Be careful of wishing negative equity on people though.
I’ll be a first time buyer myself in the next year or two.
@@Station9.75 Then why not wait? Save more, put a larger deposit down a year or two later, and get a cheaper house as well as a lower interest mortgage (due to larger deposit) for your troubles.
@@BigBoomOfDoom2 - More likely it’ll be a cheaper house with a bigger interest rate. If we end up with cheap houses and low interest rates we’ll just end up right where we started.
I’m waiting to buy within the next year or so because I think we’ll get a decent discount and then (hopefully) be able to ride out the high interest rates until they come down again. If that happens we’ll have a cheap house made even cheaper once the rates come down.
Bought my first house 1979 when interest rate was 15% but I got tax relief on the interest....
Incoming - 100 year mortgages
The banks get richer. The rich get richer and the poor get poorer. Nothing has changed…
Undoubtedly a squeeze on prices coming, but still in a far better position than a lot of peers, namely Aus/NZ.
Thats funny, a house in my street just sold for a record price. Even more than the boom time. Just shows how much these economists really know.