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Brexit and house prices

Covering Market, Trends, and Practical (but see LEMON-AID for Building & DIY)
kingofnowhere
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Brexit and house prices

#184882

Postby kingofnowhere » December 5th, 2018, 2:09 pm

Hello

Long time no write, as some of you old ones might recall me! Hopefully with a small amount of fondness.

Anyway, seems brexit has managed to put the UK into a GSD and London/SE prices to fall.

Personally I expect more of the same, over the coming years, unless we have a hard "No deal" brexit. That would put London and SE prices under much more pressure, (double digit falls) and the rest of the UK falling as well. Owwch!

Anyway,

Take care

Kon

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Re: Brexit and house prices

#187790

Postby richlist » December 18th, 2018, 5:10 pm

Pure speculation.
Don't talk the market down.
It's always quiet this time of year and doesn't really pick up until well after Christmas.

You can't change the facts.......there's a bloody great shortage of property for sale and we have low interest rates.

Onwards and upwards come the Spring

James
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Re: Brexit and house prices

#187822

Postby James » December 18th, 2018, 6:38 pm

richlist wrote:Pure speculation.
Don't talk the market down.
It's always quiet this time of year and doesn't really pick up until well after Christmas.

You can't change the facts.......there's a bloody great shortage of property for sale and we have low interest rates.

Onwards and upwards come the Spring


Pure speculation.
Don't talk the market up.
We've never been in this sort of political and economic uncertainty before, even during the recession.
You can't change the facts.......there's a bloody great crisis looming and fewer people able to buy and interest rates are rising.
Onwards and downwards come March 29.

tjh290633
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Re: Brexit and house prices

#187827

Postby tjh290633 » December 18th, 2018, 6:56 pm

James wrote:Pure speculation.
Don't talk the market up.
We've never been in this sort of political and economic uncertainty before, even during the recession.
You can't change the facts.......there's a bloody great crisis looming and fewer people able to buy and interest rates are rising.
Onwards and downwards come March 29.

Which recession are you talking about? My recollection is that 1974 was pretty dire for house prices. There was also a very big drop in the stock market. Have a look at your history.

TJH

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Re: Brexit and house prices

#187884

Postby James » December 18th, 2018, 10:09 pm

tjh290633 wrote:
James wrote:Pure speculation.
Don't talk the market up.
We've never been in this sort of political and economic uncertainty before, even during the recession.
You can't change the facts.......there's a bloody great crisis looming and fewer people able to buy and interest rates are rising.
Onwards and downwards come March 29.

Which recession are you talking about? My recollection is that 1974 was pretty dire for house prices. There was also a very big drop in the stock market. Have a look at your history.

TJH


How far back do you want to go? 1870s and 1930s were pretty bad. And 1939-1945 were dire despite a reduction in housing stock. Or we could just be pragmatic and accept I was probably taking about the last recession.

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Re: Brexit and house prices

#187897

Postby Charlottesquare » December 18th, 2018, 11:39 pm

tjh290633 wrote:
James wrote:Pure speculation.
Don't talk the market up.
We've never been in this sort of political and economic uncertainty before, even during the recession.
You can't change the facts.......there's a bloody great crisis looming and fewer people able to buy and interest rates are rising.
Onwards and downwards come March 29.

Which recession are you talking about? My recollection is that 1974 was pretty dire for house prices. There was also a very big drop in the stock market. Have a look at your history.

TJH


What was wrong with 1974?

https://www.nationwide.co.uk/-/media/Ma ... e-1952.xls

Lanark
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Re: Brexit and house prices

#187899

Postby Lanark » December 19th, 2018, 12:01 am

We are overdue a crash, brexit or no brexit.

Something that I think is becomeing increasingly obvious is the way low inflation discourages investment, a company might have a plan to spend money on infrastructure or developing new products, but they just delay it until next year, because they assume it will cost much the same so theres no hurry.

Back when 'Next year' everything was guaranteed to cost 10% more, companies had a bit more incentive to hustle and get on with things and you saw real economic growth.

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Re: Brexit and house prices

#187904

Postby Alaric » December 19th, 2018, 1:21 am

Charlottesquare wrote:What was wrong with 1974?


Earlier in the 1970s, house prices had inflated considerably, probably due to the discovery of monetarism, which had been initially interpreted as meaning that you reduced or abolished constraints on lending. In 1974/75, wage inflation as influenced by powerful unions was totally out of control. Credit became tighter, which meant that prices fell in real terms, but remained static in money terms.

If later market value solvency and accounting standards had been applied, enough of the financial sector was technically insolvent at the end of 1974 to present a serious problem. In the event, the stock market rescued itself as the then critical index the FTSE 30 doubled in not much more than a couple of months from 31 December 1974

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Re: Brexit and house prices

#187925

Postby tjh290633 » December 19th, 2018, 8:30 am

Alaric wrote:
Charlottesquare wrote:What was wrong with 1974?


Earlier in the 1970s, house prices had inflated considerably, probably due to the discovery of monetarism, which had been initially interpreted as meaning that you reduced or abolished constraints on lending. In 1974/75, wage inflation as influenced by powerful unions was totally out of control. Credit became tighter, which meant that prices fell in real terms, but remained static in money terms.

If later market value solvency and accounting standards had been applied, enough of the financial sector was technically insolvent at the end of 1974 to present a serious problem. In the event, the stock market rescued itself as the then critical index the FTSE 30 doubled in not much more than a couple of months from 31 December 1974

We bought our previous house in 1970, and prices started to rise rapidly, more than doubling by 1974. Then we had an oil shock and the markets went into reverse, leaving a lot of people in negative equity. By 1978 it had recovered and house prices were on the rise again. We had just moved to our present house, having exchanged contracts a few months earlier, just before the rapid escalation began.

TJH

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Re: Brexit and house prices

#187951

Postby Charlottesquare » December 19th, 2018, 10:01 am

tjh290633 wrote:
Alaric wrote:
Charlottesquare wrote:What was wrong with 1974?


Earlier in the 1970s, house prices had inflated considerably, probably due to the discovery of monetarism, which had been initially interpreted as meaning that you reduced or abolished constraints on lending. In 1974/75, wage inflation as influenced by powerful unions was totally out of control. Credit became tighter, which meant that prices fell in real terms, but remained static in money terms.

If later market value solvency and accounting standards had been applied, enough of the financial sector was technically insolvent at the end of 1974 to present a serious problem. In the event, the stock market rescued itself as the then critical index the FTSE 30 doubled in not much more than a couple of months from 31 December 1974

We bought our previous house in 1970, and prices started to rise rapidly, more than doubling by 1974. Then we had an oil shock and the markets went into reverse, leaving a lot of people in negative equity. By 1978 it had recovered and house prices were on the rise again. We had just moved to our present house, having exchanged contracts a few months earlier, just before the rapid escalation began.

TJH


That surprises per the Nationwide figures I linked- I can see the drop in real terms argument earlier re 1970s inflation- I did a fair bit of research reading re accounting in an inflationary environment etc at university in the mid 1980s post the 1970s- afraid back in 1974 my main financial concern was the cost of LPs and later in the 1970s the cost of a pint.

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Re: Brexit and house prices

#187957

Postby Charlottesquare » December 19th, 2018, 10:17 am

Lanark wrote:We are overdue a crash, brexit or no brexit.

Something that I think is becomeing increasingly obvious is the way low inflation discourages investment, a company might have a plan to spend money on infrastructure or developing new products, but they just delay it until next year, because they assume it will cost much the same so theres no hurry.

Back when 'Next year' everything was guaranteed to cost 10% more, companies had a bit more incentive to hustle and get on with things and you saw real economic growth.


If it results in cheaper money it could do the opposite.

My view on investment spending is it is currently, in our case, more constrained by market uncertainty.

We, as a property group, we survived post the 2008-2012 debacle with a few scars and wounds, but we are still here, a lot of the local companies doing development went to the wall and are no more. A combination of that experience, Indy Ref uncertainty, Brexit uncertainty, possible Indy Ref 2 further uncertainty due to Brexit uncertainty, has us still in hunkered down mode- cash is building up in the bank but we have no appetite to risk unbalancing the business by reducing that buffer- our income is commercial property rents (lucky very little retail), these depend, our tenants depend, on the wider economy, property is not liquid and now carrying nearly two years capital and interest payments to our banks on deposit gives comfort we can ride out most storms if they arrive.

It may be wasteful re interest paid but provides a safety net that our cashflow will not come under pressure for a decent interval if a bad Brexit say results in sterling lurching badly downward and interest rates rising to protect it (though frankly given the state of the economy at that juncture cannot see interest rates rising)Our vulnerability is that the wider economy hits problems so our rents come under pressure at the same time as interest rates rise, interest/repayment being a significant figure for a geared property investment group.

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Re: Brexit and house prices

#187963

Postby 77ss » December 19th, 2018, 10:28 am

Charlottesquare wrote:
tjh290633 wrote:
Alaric wrote:
Earlier in the 1970s, house prices had inflated considerably, probably due to the discovery of monetarism, which had been initially interpreted as meaning that you reduced or abolished constraints on lending. In 1974/75, wage inflation as influenced by powerful unions was totally out of control. Credit became tighter, which meant that prices fell in real terms, but remained static in money terms.

If later market value solvency and accounting standards had been applied, enough of the financial sector was technically insolvent at the end of 1974 to present a serious problem. In the event, the stock market rescued itself as the then critical index the FTSE 30 doubled in not much more than a couple of months from 31 December 1974

We bought our previous house in 1970, and prices started to rise rapidly, more than doubling by 1974. Then we had an oil shock and the markets went into reverse, leaving a lot of people in negative equity. By 1978 it had recovered and house prices were on the rise again. We had just moved to our present house, having exchanged contracts a few months earlier, just before the rapid escalation began.

TJH


That surprises per the Nationwide figures I linked- I can see the drop in real terms argument earlier re 1970s inflation- I did a fair bit of research reading re accounting in an inflationary environment etc at university in the mid 1980s post the 1970s- afraid back in 1974 my main financial concern was the cost of LPs and later in the 1970s the cost of a pint.


More recently, check out the 1988, Lawson fuelled, boom. Prices rose to a peak in mid-1989, then fell, and fell, and fell.... By 20% in absolute terms and 36% in real terms.

What goes up, can come down. It was a terrible time for a lot of young couples. Negative equity (in spades), partnership break ups etc.

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Re: Brexit and house prices

#187970

Postby Dod101 » December 19th, 2018, 10:39 am

I must say I am totally indifferent to house prices and what happens to them. If house prices fall that will be good for my grandchildren who will no doubt be shortly trying to get onto the housing ladder, but of course they are taken as a sort of bellweather for the economy as a whole and to that extent a fall is not good news.

But I do not understand the obsession with the price of houses.

Dod

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Re: Brexit and house prices

#187974

Postby Charlottesquare » December 19th, 2018, 10:52 am

Dod101 wrote:I must say I am totally indifferent to house prices and what happens to them. If house prices fall that will be good for my grandchildren who will no doubt be shortly trying to get onto the housing ladder, but of course they are taken as a sort of bellweather for the economy as a whole and to that extent a fall is not good news.

But I do not understand the obsession with the price of houses.

Dod


Within a bad shock impact leading to a drop in may not be that easy for them without large chunks of equity to appease what will be far more stringent lending criteria from the banks, prices may be cheaper (albeit supply will likely dry up) but banks will also want far larger deposits- great if bank of mum and dad (or grandparents) can oblige, still cannot get on the ladder if they cannot. I have a son (27) amassing tens of thousands in his company but sitting on his hands waiting to see which way the wind blows post March.

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Re: Brexit and house prices

#187975

Postby Alaric » December 19th, 2018, 10:53 am

77ss wrote: Prices rose to a peak in mid-1989, then fell, and fell, and fell.... By 20% in absolute terms and 36% in real terms.


More than that in some areas. We have a Council Tax band from 1991 implying a worth of a good deal below what we had paid in 1988. Prices recovered to 1988/89 levels during the first Blair government and just continued to rise and rise.

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Re: Brexit and house prices

#187978

Postby Nimrod103 » December 19th, 2018, 11:03 am

77ss wrote:
Charlottesquare wrote:
tjh290633 wrote:We bought our previous house in 1970, and prices started to rise rapidly, more than doubling by 1974. Then we had an oil shock and the markets went into reverse, leaving a lot of people in negative equity. By 1978 it had recovered and house prices were on the rise again. We had just moved to our present house, having exchanged contracts a few months earlier, just before the rapid escalation began.

TJH


That surprises per the Nationwide figures I linked- I can see the drop in real terms argument earlier re 1970s inflation- I did a fair bit of research reading re accounting in an inflationary environment etc at university in the mid 1980s post the 1970s- afraid back in 1974 my main financial concern was the cost of LPs and later in the 1970s the cost of a pint.


More recently, check out the 1988, Lawson fuelled, boom. Prices rose to a peak in mid-1989, then fell, and fell, and fell.... By 20% in absolute terms and 36% in real terms.

What goes up, can come down. It was a terrible time for a lot of young couples. Negative equity (in spades), partnership break ups etc.


House prices fell and fell and fell between 1989 and 1993 because base rates went from 8.5% to 15% in order to maintain the Pound within the ERM. It was a lesson in what the EU can do the UK economy, which Major, Clarke, Blair and many others failed to learn. House prices are a function of the ease of borrowing and cost of borrowing money. We appear to be in an international rate tightening environment, so prices will come down, albeit slowly.

Saying that, EU immigration is now reducing (because of Brexit, the drop in the £, and improvements to the Polish and other EE economies), and based on anecdotes I think EU immigrants have been responsible for a significant up push to prices. Immigration still runs at a net 200,000 and I am intrigued to see whether non EU immigrants keep that house price support going.

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Re: Brexit and house prices

#188095

Postby Arborbridge » December 19th, 2018, 5:13 pm

Nimrod103 wrote:
77ss wrote:House prices fell and fell and fell between 1989 and 1993 because base rates went from 8.5% to 15% in order to maintain the Pound within the ERM. It was a lesson in what the EU can do the UK economy, which Major, Clarke, Blair and many others failed to learn. House prices are a function of the ease of borrowing and cost of borrowing money. We appear to be in an international rate tightening environment, so prices will come down, albeit slowly.

Saying that, EU immigration is now reducing (because of Brexit, the drop in the £, and improvements to the Polish and other EE economies), and based on anecdotes I think EU immigrants have been responsible for a significant up push to prices. Immigration still runs at a net 200,000 and I am intrigued to see whether non EU immigrants keep that house price support going.


Difficult for ordinary mortals to find the truth in these things. For example, a "lesson for what the EU can do to the UK economy"? - others would say "what the EU has done for the UK economy" - i.e extremely positive.

Whether EU immigration has caused an increase in house prices, I'm not convinced. As you say, it's all anecdotal, and from what one hears, much of the immigration is into low paid jobs that our own citizens will not do- hardly likely to cause an increase in house prices. On the other hand, non- EU immigration includes some very wealthy Russian oligarchs, Arabs and Chinese buying up half of London. It seems to me, they are more likely to have dragged prices upwards. We can all write our own scripts, but prove nothing.

As regards the future of immigration, I understand that EU immigration is down, but non-EU up in roughly the same degree. Promising to reduce immigration when there's a demand for labour seems a mug's game. King Cnut tried to demonstrate the folly of such an action - or more relevantly as Mrs T said, "you cannot buck the Market".

Arb.

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Re: Brexit and house prices

#188121

Postby Dod101 » December 19th, 2018, 5:54 pm

To me this argument is very simple. The population of the UK has grown hugely over the last 10/15 years. All these extra people are not living on the streets so they live somewhere, whether in rented accommodation, council housing or the modern equivalent, housing associations, renting private accommodation or buying. Any of these actions is increasing demand for some form of housing. That I think is percolating through the housing stock and increasing demand. The result is that there is a shortage between available supply and the demand, hence house prices rise. Brexit, if it happens, will make little difference in the short term but may suppress demand in a few years, but I think it will take a long while for the supply and demand to balance (if ever) so I do not see Brexit itself making a lot of difference. It depends though if Brexit induces a recession, then who knows, at least in the short term.

Dod

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Re: Brexit and house prices

#188135

Postby Nimrod103 » December 19th, 2018, 6:56 pm

Arborbridge wrote:
Nimrod103 wrote:
77ss wrote:House prices fell and fell and fell between 1989 and 1993 because base rates went from 8.5% to 15% in order to maintain the Pound within the ERM. It was a lesson in what the EU can do the UK economy, which Major, Clarke, Blair and many others failed to learn. House prices are a function of the ease of borrowing and cost of borrowing money. We appear to be in an international rate tightening environment, so prices will come down, albeit slowly.

Saying that, EU immigration is now reducing (because of Brexit, the drop in the £, and improvements to the Polish and other EE economies), and based on anecdotes I think EU immigrants have been responsible for a significant up push to prices. Immigration still runs at a net 200,000 and I am intrigued to see whether non EU immigrants keep that house price support going.


Difficult for ordinary mortals to find the truth in these things. For example, a "lesson for what the EU can do to the UK economy"? - others would say "what the EU has done for the UK economy" - i.e extremely positive.

Whether EU immigration has caused an increase in house prices, I'm not convinced. As you say, it's all anecdotal, and from what one hears, much of the immigration is into low paid jobs that our own citizens will not do- hardly likely to cause an increase in house prices. On the other hand, non- EU immigration includes some very wealthy Russian oligarchs, Arabs and Chinese buying up half of London. It seems to me, they are more likely to have dragged prices upwards. We can all write our own scripts, but prove nothing.

As regards the future of immigration, I understand that EU immigration is down, but non-EU up in roughly the same degree. Promising to reduce immigration when there's a demand for labour seems a mug's game. King Cnut tried to demonstrate the folly of such an action - or more relevantly as Mrs T said, "you cannot buck the Market".

Arb.


I would totally agree with Dod's comment. The population has grown enormously, and these people are not living on the streets. You fall into the trap of thinking the immigrants (whether from the EU or not) are mainly destitute car washers, or Russian oligarchs and Syrian brain surgeons. Most are people like the locals with jobs to do, and families to house. My couple of anecdotal examples were exactly that, taking out mortgages and offering the asking price. If they work hard and play by the rules they are welcome, but don't pretend they don't inflate property prices.

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Re: Brexit and house prices

#188176

Postby Arborbridge » December 19th, 2018, 10:43 pm

Dod101 wrote:To me this argument is very simple. The population of the UK has grown hugely over the last 10/15 years. All these extra people are not living on the streets so they live somewhere, whether in rented accommodation, council housing or the modern equivalent, housing associations, renting private accommodation or buying. Any of these actions is increasing demand for some form of housing. That I think is percolating through the housing stock and increasing demand. The result is that there is a shortage between available supply and the demand, hence house prices rise. Brexit, if it happens, will make little difference in the short term but may suppress demand in a few years, but I think it will take a long while for the supply and demand to balance (if ever) so I do not see Brexit itself making a lot of difference. It depends though if Brexit induces a recession, then who knows, at least in the short term.

Dod


Quite agree with this - it's supply and demand. However, if banks don't lend the money, prices cannot increase. A few years back, they were throwing cash at people who wanted mortgages in gay abandon, and naturally prices rose - that had little to do with immigration but just fuel poured on the flames.
If you are on zero hours contracts or earning minimum wage you don't have any affect on house prices.

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