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  • Property Prices

    Is a property crash coming?

    greg6

    I've noticed a combination of factors all merging together which makes me think a property crash may be coming. Id like to know what people think and so when you think it may start.

    The following reasons are why I think its coming soon:

    -The new rules not allowing interest on loans to be tax deductible BIG ONE

    -New EPC (energy performance) rules soon to make thousands of housing unlettable - QUITE A BIG ONE

    -****This one is interesting, one I forgot about, in 2013 thousands of people took out Help To Buy loans (government lends them 20% deposit for 5 years interest free). Well guess what, times now up! April 2018 will see thousands been forced to start paying interest on these help to buy loans. Based on my judgement, these are the type of people who couldn't figure out how to save more than 5% for a deposit on a house in the first place, so I don't expect they will be smart enough to figure out or have planned how they will pay the extra interest when this kicks in april this year meaning ding ding ding REPOSSESSIONS****

    -Increased Stamp duty another BIG ONE

    -Brexit - Its proven that less people are now immigrating here so less pressure on housing.

    -London Property prices stalling

    What do you think? I really can't see how its not possible for a crash.....also, bets on when it will happen ...

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    You forgot rising interest rates too.

    Yes, I do think there is a crash coming. Deep down, everybody knows that prices need to crash and now there is the perfect excuse: Brexit.

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    • Increased Tax - All we have seen is a shift to LTD Company BTL. It will effect some higher rate taxpayers who have previously bought in personal name. Except most landlords have unencumbered properties & of those that are not most are basic rate taxpayers. The market effect is not great but still minimal.
    • New EPC - Just requires a bit of work to get the rating up for most properties. That can be as simple as changing the lighting in many properties. The market effect should be minimal & shoudnt cause any "sales".
    • HTB - There are 95% LTV products in the market to replace the help to buy element. There of course will be some that will find difficulties. The market effect should be minimal.
    • Increased Stamp Duty - The 3% is a big factor in high value house price areas. Up north its a pain but not devastating about £3k for £100k property. This may dampen purchases but for many it may just mean a higher LTV (and lower deposit) to ensure they have the cash available. The impact on existing minimal, on new purchases a little.
    • Brexit - No effect. Net people are still coming to the uk there is no "mass exedos" in the data. The impact again minimal.
    • London House Prices - I see a lot of fake news about house prices. London House Prices are not falling they are just not increasing at the rate that they used to. Mainly due to SDLT Changes and Removal of Mortgage Interest Relief meaning landlords are often investing up north.
    • Interest Rates - are very low and increases in base rate speculated seem to be minimal increases.

    I see no crash at all. What I see is the same level of homes available but an ever increasing population from births to immigration. Plus the availability of cheap credit remains plentiful.

    Many of the items such as SDLT + Tax were put in place because the government thought market was overheating and wanted to give First Time Buyers a chance. They were never designed to cause some kind of crash.

    Though you also missed some other changes such as PRA affordability requirements that help to ensure affordability & stability.

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    _________________________________________________________________________


    The above post is not financial advice, its often me rambling - passing time on a coffee break.
    If you are looking for the Best BTL Mortgage? Call the Specialist Team at Bespoke Finance.


    _________________________________________________________________________


    Hi Adam,

    Got to disagree with you I'm afraid.

    The number of EU tenants has dropped drastically in London.

    I'm seeing large numbers of BTL properties coming to the market already with lots of price reductions.

    I think the price correction will start from mid next year and will be mainly caused by S24, Brexit and rising interest rates.

    All three will happen around then.

    It's going to be very ugly I suspect.

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    The HTB suckers will have to give up their daily expensive coffee.

    Stop expensive  socialising.

    Give up expensive  mobile phone contracts along with expensive mobiles.

    No multiple  foreign holidays  etc; etc.

    They will have to give up these things or as you suguest face repossession.

    Rather than a HPC a slow deflation of the house price bubble.

    Had Govt introduced full S24 overnight that could well have precipitated a crash.

    But as can be seen many LL have advised on PT that they have been slowly selling off and rationalising their property portfolio.

    This what I am doing.

    Govt has been quite clever in the slow introduction  of S24.

    I doubt whether  many LL or LA will take the slightest bit of notice of EPC regulations.

    You can't just expect 600000 properties to be taken off the market overnight just because they don't  meet some arbitrary measure of energy  efficiency.

    It just won't happen.

    Councils refuse to deal with beds in sheds even when they know exactly where they are.

    They certainly won't be shutting down rental properties that aren't EPC E compliant.

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    Hi Paul

    I am hearing this a lot on these forums - that a lot of LL are divesting to de-leverage as S24 starts to bite, which makes total sense.  But who is buying and who is going to keep buying as more and more LL do this?  And what effect will this have on house prices.  Cheers

    Peter

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    I guess there will always be newbies and of course cash buyers

    I can easily see cash LL becoming 70% of the market

    FTB won't buy these properties because they can't or don't want them.

    Eventually  the cash buyers will run out of cash and not that many newbies will invest.

    But these ex LL properties always seem to be bought by someone


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    Depends where you are.I cant see how prices outside of London are overvalued - can still get 6-8% yield.

    London depends what. New build flats over £800k can see a reasonable crash a but only from in my view silly prices. Decent family homes in decent areas might decline a little but not massively as there is still so much demand from those who spent (wisely or not) theirs/their parents savings getting that deposit on a two bed flat and now realise it isnt a home for life.

    All depends on interest rates through... cant see them getting past 2% anytime soon but will be led by the USA.

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    What crash?? You have a reduction in activity in certain areas and 2nd/3rd movers are staying longer.

    Many LL are prepared for the changes or know what they need to do.

    As always some people will not be ready and that might provide some good opportunities Smile

    btw I were once a 95% borrower Smile

    Have a lovely Easter

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