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You just wait

Folk have been saying that house prices must come down for ages now.

It came as a senior executive at Nationwide, one of the country’s biggest mortgage lenders, suggested that house prices could drop as much as 30pc next year in the worst case if Britain is plunged into a protracted recession.

The reason they got so high – given the planning restrictions – was because the time value of money has been pretty much nothing for near two decades now. So, the time value of money goes up, house prices come down, problem over.

Those same people are going to be bitching just as loudly as before. Therefore it wasn’t actually house prices they were bitching about, was it?

13 thoughts on “You just wait”

  1. A 30% fall brings us all the way back to March 2016 levels. My mortgage back then was 1.64%; today’s rates are 5.49%. Ceteris paribus, prices could fall a lot further.

    The on-going supply restrictions and ever-rising demand from high immigration (especially of high-skilled high-earners like Hong Kong refugees and Indian IT workers) will cushion prices; though as you say, houses won’t be any more affordable.

  2. My Mum needs to sell her house to pay her care fees. Naturally, the fees will be going down 30% as well, won’t they?

  3. A 30% drop in nominal prices after a couple of years of 10% consumer price inflation => a halving “in real terms”. No doubt it’s happened before.

    Anyway, thank you to everyone who supported years of free money, net zero, lockdowns, and stupid sanctions on Russia. (Come to think of it that’s pretty much like thanking the Guardian, eh?)

  4. Of all the hysterical nonsense in the Terriblegraph that’s best ignored, the most hysterical and nonsensical is anything to do with house prices.

    The link in the paragraph about a Nationwide exec predicting a 30% fall is to a story which doesn’t even mention Nationwide. FYI, the guy they mean said this was Nationwide’s worst case scenario. They are predicting a fall of 8-10%. HSBC & Barclays aren’t even that negative.

    The house price “crash” ain’t happening. Average prices might fall back to early 2021 levels. Perhaps more in a few pockets where prices went up more dramatically.

  5. House prices may indeed fall but the primary effect on the market is that people who have had a ‘my house is worth..’ price in their head will not put the house up for sale unless they are going to get that. Many house sales and moves are discretionary. People just wait until the market improves. That reduces the numbers on sale and the result of that restricted supply tends to stabilize price falls. Part of the demand comes from the same non-sellers being also non-buyers. Few just leave the market. Many join it via immigration. You’ll get a stagnant market until things start looking up elsewhere in the economy. Of course that market is itself a drag on the economy through people being unable to move.

    Summary: Prices won’t come down 30%, they will drop a little while turnover drops a lot.

  6. I’ve never kept a record of what interest rates we paid on our mortgages but I do know that one started at 13.5% p.a. Even if you allow for the blessed MIRAS that still felt a burden at the time.

  7. “Anyway, thank you to everyone who supported years of free money, net zero, lockdowns, and stupid sanctions on Russia”

    Our host supported the QE years, and has steadfastly sat on the fence over the Global Warming/Climate Change debacle, so he ticks at least 2 of your 4 boxes. I can’t off the top of my head remember whether he was anti-lockdowns or is anti Russian sanctions either.

  8. I don’t understand the current “Britain is being impoverished by Russian sanctions” trope – where did that one come from? If Rishi Sunak announced something like “as a true Brexiteer, my government is going to take further steps to strengthen British independence from Euro-Atlantic domination by withdrawing from NATO and signing a Treaty of Friendship with Russia”, then something something underpants gnome Britain will be rich again? I don’t get it. Where’s the PROFIT?

    It’s not like Britain imported much energy from Russia before anyway. We’re being screwed by the fact we’re a net importer of natural gas, which has increased in price. In large part, though not exclusively, due to Russia’s invasion of Ukraine and the resultant attempt of many European countries to reduce their dependence on Russian energy exports. Fine. But suppose Britain went cap in hand to Russia begging for cheap gas in return for our eternal friendship and full British support at the UN for Russian territorial claims over “the area formerly known as Ukraine”? I’m sure Putin would love the geopolitics of that. But what could he do to reward us? Russia doesn’t have a lot of capacity to export LNG, and there’s no pipeline from Russia to the UK. It would take many years to build one, even if we did think it would be a great idea for Britain to start relying on Russia for gas.

    Realistically no British PM would have the political ability to turn British foreign policy on a six-pence like that – insufficient support from their own party, from parliament, from the electorate. But even if one postulated that such support should be there and we urgently need to end a foreign policy driven by “Russophobia”, it’d be naive to think turning our back on our current international arrangements (with partners who are richer than Russian and with whom we trade a lot more) would somehow be cost-free. And I just don’t get why Britain changing its stance on Russia’s invasion of Ukraine is supposed to bring the benefit of cheap energy back, without which we’d be ripping up a lot of valuable ties for no clear reason.

  9. My 5-year fixed just came up for renewal, the increase in my monthly payment is 28.9% not sure if that’s a coincidence with the 30%

  10. Bloke in North Dorset

    I’m surprised the housing industry doesn’t make a big deal out of falling prices: now is the time to trade up.

  11. “without which we’d be ripping up a lot of valuable ties for no clear reason.”

    Thats valuable ties with the EU who hate us and are holding us to ransom over NI, and the US, the permanent State part of which hates us as well, and never misses a trick to do us down when ever they can. With friends like these, who needs enemies?

  12. @Jim

    That’s melodramatic. For supposed allies, our relationship with Europe is rather ropey at the moment (maybe inevitable for the first years after Brexit until our relationship settles down?) but we’re talking about “poor for allies” i.e. we’re looking at the “allies” part of the scale and thinking we’re on the lower end of it. The “enemies” part of the scale is a long long way down, and pretty much everything you can think of would be many, many times worse.

    As for the USA: if you look at what the American politics are for a trade deal, and what the British politics are for a trade deal, I think it’d be very difficult to get a comprehensive deal done. That’s a product of the underlying domestic politics and explains why the UK has been opting for other approaches (state-by-state “deals” and at the international level some sector-by-sector mini-deals) instead. Personal politics of the current president/PM have relatively little sway on that matter. But to focus on trade, or the political mileage US politicians can get out of Brit-bashing for their domestic audience, ignores how close the UK and USA are as allies in terms of intelligence-sharing, nukes, how tightly integrated British firms are into US “defense” procurement (= some big $ exports in strategic industries)… you’d be saying goodbye to all that if the UK decided on a new “non-aligned”/”multipolar” foreign policy and scrapped our Euro-Atlantic ties. Even under Biden, we managed to put AUKUS together, which involves an incredibly close level of cooperation – because in this realm, regardless of incumbent politicians, the underlying political geography is more favourable. When politicians talk up the “special relationship” it’s mostly BS and overinflating Britain’s importance in the world, but that doesn’t mean there’s no substance in it. There are precious few allies the US would be tight enough with to enter into anything like AUKUS.

    We may be at the “strained family ties” stage at the moment, but if you already don’t like this, then you really, really don’t want to see the “officially kicked ourselves out of the family, now their sworn geopolitical rival” stage. What the EU and US would have in their power to do to us in that scenario does not bear thinking about. We got a very mild taste of it after the Suez fiasco. The full dose would make the fuss we’ve had over Brexit or the Mini-Budget look trifling in comparison. The idea that we’d somehow be able to make up for it because at least Russia would sell us cut-price gas through a non-existent pipeline is the stuff of la-la land.

  13. Our relationship with the EU and with the USA sounds very much like an abusive one.

    Suez was the yanks telling us the facts of life and if we fall out of line then we get more of the same. Ever since, we’ve sucked up to the yanks like good little puppies afraid to get another beating.

    Brexit is a similar situation. We can leave the EU, but only on their terms and woe betide us if we then try and do something they don’t like.

    The schism in international affairs that is happening now is because Russia and especially China don’t want to be supplicants to the Americans. China has seen how the Americans treat their friends.
    The US seems to have adopted Microsofts ’embrace,extend,extinguish’ as their foreign policy, and China under Xi is protecting itself accordingly.

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