Latest / Merryn Talks Money / The Collapse of the UK Housing Market May Be Coming

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The Collapse of the UK Housing Market May Be Coming · Merryn Talks Money

0:09
Speaker 1: Welcome to Marin Talks Money, the podcast in which people
0:12
Speaker 1: who know the markets explain the markets. I'm Marin's Somerset work. Now.
0:16
Speaker 1: This week we are focusing on the one thing I
0:18
Speaker 1: know you all care about most housing and mortgages, and
0:22
Speaker 1: for that topic, because it's so important, we are bringing
0:25
Speaker 1: in one of Bloomberg's best on the subject, Neil Callanan,
0:28
Speaker 1: who has written about the real estate and the mortgage
0:30
Speaker 1: market for more than twenty years. That's several cycles worth now,
0:34
Speaker 1: definitely now. And also you have a special treat this week,
0:38
Speaker 1: something slightly different. Instead of keeping the wonderful John Steppic
0:42
Speaker 1: just to five minutes at the top of the episode,
0:44
Speaker 1: we are yielding to pressure from all of you and
0:47
Speaker 1: letting him stick around for the whole thing. You can
0:50
Speaker 1: let me know later whether you think that is a
0:52
Speaker 1: good thing or not. Thanks John, I see that you
0:54
Speaker 1: me and my mom sent and what then? Yeah? Do
0:57
Speaker 1: you know what? You could ask her to stop sending
0:58
Speaker 1: it to tenty times? Is enough? Mom? Right now, we
1:04
Speaker 1: are going to start with some stories of misery because
1:07
Speaker 1: they may becoming more may be coming and Neil Neil
1:11
Speaker 1: tell Us explained to us just how bad things can
1:14
Speaker 1: get when house prices start falling. So I'm Irish obviously
1:20
Speaker 1: from the accent and in Aland we had the perfect
1:24
Speaker 1: combination of a falling economy and rising interest rates in
1:27
Speaker 1: the last crowd, which really compounded the property downturn. So
1:31
Speaker 1: in my own case, my flat had been worked about
1:34
Speaker 1: three seven five. It was a two bed in an
1:36
Speaker 1: up great suburb of Dublin, and I actually felt that
1:40
Speaker 1: was way too much, and I looked into renting. To
1:43
Speaker 1: rent a similar property in the city center would cost
1:45
Speaker 1: twice as much, and I figured, they will never fall
1:48
Speaker 1: fifty percent. I think they're gonna fallow a bit, but
1:50
Speaker 1: they'll never fall fifty And two years after that has
1:53
Speaker 1: worked seventy two And really only about two years ago
1:58
Speaker 1: that I got back to what it had been worked
2:00
Speaker 1: when I bought us, not what it was worth. It
2:04
Speaker 1: still worked, probably seventy five ground less than the peak.
2:08
Speaker 1: And that's how bad properly prices can get when you
2:11
Speaker 1: go into a downturn at the same time as when
2:13
Speaker 1: interest rates are hiking. Because the interest rate hikes, me
2:16
Speaker 1: fewer people are out there to actually buy it, and
2:18
Speaker 1: I can accelerate the declines of so you eventually got
2:21
Speaker 1: out of even some nominal terms, but you have lost
2:23
Speaker 1: quite a lot of my in real terms. Absolutely, it
2:25
Speaker 1: was quite frustrating having some money home every month for
2:27
Speaker 1: an apartment that I could barely live and obviously because
2:30
Speaker 1: I was living here, so that was difficult. So the key,
2:34
Speaker 1: the key phrase of yours and I think we should
2:35
Speaker 1: all keep in our minds, is it'll never fall. I mean,
2:41
Speaker 1: I don't see probably prices in the UK falling fifty,
2:44
Speaker 1: but I do think they will fall a lot, and
2:47
Speaker 1: I think they will fall more than people expect. You know.
2:51
Speaker 1: You you see this constant effort from people in the industry,
2:57
Speaker 1: the vested interests to kind of portray rey single bit
3:00
Speaker 1: of kind of okay news has signed the bottom is in,
3:03
Speaker 1: the bottom is in, and of course it's quite the opposite.
3:05
Speaker 1: We're actually just at the beginning of what's going to
3:07
Speaker 1: be a very interesting journey to see what actually happens.
3:10
Speaker 1: And the idea that nine months in the property prices
3:14
Speaker 1: have um, you know, bottom up because right move asking
3:18
Speaker 1: prices rose is you know, on one level hilarious because
3:22
Speaker 1: if I did own a flat in London and let's
3:24
Speaker 1: say it was worth five grand, and I don't own
3:26
Speaker 1: the property here, but if I did, I could ask
3:28
Speaker 1: for a million quid for it. I'm not going to
3:30
Speaker 1: get it. But my asking price there's no resemblance in
3:35
Speaker 1: many cases to my to the price of the property
3:37
Speaker 1: as work, particularly because the state agents have been promising
3:40
Speaker 1: people higher and higher prices in order to get the
3:43
Speaker 1: instruction because there was so few properties on the market,
3:46
Speaker 1: so the prices that many are being offered that are
3:49
Speaker 1: completely unrealistic. And you know, I live in central London
3:52
Speaker 1: and there was a purpose built flat complex near me
3:55
Speaker 1: Um and one of the apartments they're sold for three
3:58
Speaker 1: seven five. Recently I was looking because actually I wouldn't
4:00
Speaker 1: mind living there. The next one that came on almost identical,
4:04
Speaker 1: almost the same size, very little difference asking price four
4:08
Speaker 1: seven five. Don't wear that one. I mean, you know,
4:11
Speaker 1: but now what we're going to have to do is
4:12
Speaker 1: you have this big, long pause until that seller actually
4:15
Speaker 1: realizes my flawt is completely overvalid and if I actually
4:18
Speaker 1: want to sell it, I'm going to have the cup.
4:20
Speaker 1: But you're never going to see somebody really dred ground
4:23
Speaker 1: in the first one. They're gonna cut twenty and then
4:25
Speaker 1: twenty more, and then maybe five and then maybe put
4:28
Speaker 1: it back up a bit just to make it look
4:30
Speaker 1: like you've coult even less the next time. And you know,
4:33
Speaker 1: these all these tactics go on. But this is the
4:35
Speaker 1: problem with the market in the next while is you're
4:38
Speaker 1: going to just see a standoff between buyers and sellers,
4:41
Speaker 1: and transactions are going to plummet and it's going to
4:43
Speaker 1: be hard to get market evidence. But eventually a few
4:46
Speaker 1: months sellers will start to capitulate, and you're starting to
4:48
Speaker 1: see some evidence of that. I think at the million
4:50
Speaker 1: plus bracket, not at the very high end, but in
4:53
Speaker 1: the million plus bracket, I think there is some capitulation happening.
4:56
Speaker 1: And you're also seeing some capitulation in all those areas
4:59
Speaker 1: that London people moved out to during the pandemic and
5:04
Speaker 1: the sudden realization of actually, if I need to sell
5:07
Speaker 1: my house or a flat to go back to London,
5:09
Speaker 1: the only person who can buired is a local person
5:11
Speaker 1: and they can't afford to pay anything near what I paid.
5:15
Speaker 1: And you know, it's interesting to see that the fastest
5:18
Speaker 1: pace of decliners in the southwest of England now, which
5:21
Speaker 1: is Cornwell and Summer Center, and then obviously everybody's headed
5:25
Speaker 1: off there in the pandemic and now they're going to
5:27
Speaker 1: probably have a quite a bad crash. I would say, well,
5:29
Speaker 1: this is entertaing. I mean, John and I were quite
5:31
Speaker 1: a lot of one pick and everything. You said that.
5:32
Speaker 1: But one of the things that John I've been saying
5:34
Speaker 1: for a while now is that if you want to
5:35
Speaker 1: see the house prices going to fall the fastest, go
5:37
Speaker 1: look for a big cold house in the country, and
5:39
Speaker 1: it went up the most during the pandemic, and they're
5:41
Speaker 1: definitely going to come down the most now, you know,
5:43
Speaker 1: because one winter living in Northumberland the countryside, and if
5:47
Speaker 1: you're not from the country south of Northumberland, you're coming
5:49
Speaker 1: back to London pretty quickly, pretty coularly, another hell of
5:51
Speaker 1: a loss. No um. Taking on what you said, one
5:55
Speaker 1: of the things that always happens, and god, we're all
5:57
Speaker 1: all the trim or something will think quite a few
5:59
Speaker 1: property because one of the things that always happens is
6:02
Speaker 1: the standoff between buyers and sellers, the sort of transaction paralysis.
6:07
Speaker 1: Well that that buyers go well I'm not paying that,
6:09
Speaker 1: and the sellers go well I'm not selling for that.
6:11
Speaker 1: So we're in that period right now. But if you
6:13
Speaker 1: look at the RIX numbers which I want to talk about,
6:14
Speaker 1: the latest numbers out on on the housing market, you
6:17
Speaker 1: can see that a much higher number of sales are
6:21
Speaker 1: going through a below asking price than there's normal, normal
6:23
Speaker 1: being a market that's vaguely healthy, which is not this market.
6:26
Speaker 1: So I can't remember the numbers. Sixty eight cent on
6:30
Speaker 1: the on the latest numbers out today going for below
6:32
Speaker 1: asking person a more normal number in it and a
6:34
Speaker 1: normal market is about is about thirty. So now tells
6:37
Speaker 1: us there's the beginnings of this happening. But John, what
6:40
Speaker 1: else is in this rather miserable report from from RIX. Well,
6:44
Speaker 1: it's just that thing we are so the next of
6:46
Speaker 1: these basically the agent seem that the things going to
6:48
Speaker 1: happen to the market. Um, the key thing here is
6:52
Speaker 1: that they're telling the truth in the rest. So mostly
6:55
Speaker 1: when you hear a state agents talking, they're lying. Now
6:57
Speaker 1: we know that they're telling you what they think you
6:59
Speaker 1: can get for you as to that you'll bring your
7:01
Speaker 1: instruction into their mean we know it's not true and
7:03
Speaker 1: they're telling you there were ten but a ten viewers
7:04
Speaker 1: one in fact, they were non excepta So we know
7:06
Speaker 1: what's normally going on with the state agents. But on
7:08
Speaker 1: REX when it comes to this sever they're telling the truth,
7:11
Speaker 1: telling anonymously what they really think, right, Yeah, and it's
7:14
Speaker 1: surprisingly I could um in terms of if you if
7:16
Speaker 1: you take like they usually print a chart in my
7:19
Speaker 1: news later whenever the REX figures come out. It's basically
7:23
Speaker 1: if you take their forecast for the next three months
7:25
Speaker 1: and you advance them three months and you compare it
7:27
Speaker 1: to us happening at whose prices it's actually really surprisingly
7:30
Speaker 1: I could The only time they've been notably wrong which
7:33
Speaker 1: during but that's because people proved wrong because the thank
7:38
Speaker 1: England made a massive intervention and effect that the housing
7:41
Speaker 1: marketing and terry st rates um and so that can
7:44
Speaker 1: stopped the whole market from collapsing during covid um. But yeah,
7:50
Speaker 1: so I suppose the other interesting thing about it is
7:52
Speaker 1: that we have sort of been hearing like the half
7:54
Speaker 1: Fax whose prices figure was oh yeah flat, prices were
7:57
Speaker 1: flat in January and is Neal was seeing right move
8:00
Speaker 1: trying to start the year we have a better, good
8:01
Speaker 1: cheer and how spell does have been seeing that we're
8:04
Speaker 1: seeing a bit of interest, a bit more than it
8:07
Speaker 1: was at the botmob. But the recks of it to
8:09
Speaker 1: the really just had none of that. The stagents would
8:12
Speaker 1: even gloomier than in December sales a static there's fewer
8:16
Speaker 1: buy it in Quiryes, that that's I thought that was
8:19
Speaker 1: the most interesting chart of all. If you look at
8:21
Speaker 1: the chart of of buyer inquiries over the last couple
8:24
Speaker 1: of years, and you can see that in the first
8:26
Speaker 1: half of the link is actually berserk going up as
8:29
Speaker 1: everyone deferately wants to move sadly to these answers in
8:32
Speaker 1: the Southwest. And now you look at it and you
8:35
Speaker 1: can see it is blumping like a stone. Yeah, I mean,
8:39
Speaker 1: and that makes sense. I mean, so we had a
8:41
Speaker 1: massive mortgage shot in October and November, and there are
8:45
Speaker 1: some people who at that point where have been kicked
8:48
Speaker 1: off their transaction and they probably are still committed to
8:52
Speaker 1: buy in because once you get that found the process
8:55
Speaker 1: of like I really don't want to stick with ARM,
8:58
Speaker 1: but that back dogs probably already clear. And now that
9:03
Speaker 1: mortgage rates have come down a little bit um and
9:06
Speaker 1: mortgages are now available again um and so you're probably
9:09
Speaker 1: quite rapidly going into that phase where all the people
9:12
Speaker 1: who still wanted to move and moved, all the people
9:14
Speaker 1: who can wait, are now cittaing there's going well, I
9:17
Speaker 1: don't really want to move now if prices might fall
9:20
Speaker 1: by x percent shortly. We've also had that horrible mortgage shock,
9:24
Speaker 1: but now rates are coming down stick and afford to
9:26
Speaker 1: kind now wait, um, so yeah, so I think that.
9:30
Speaker 1: I mean, it's that thing of just starting to see
9:32
Speaker 1: that it's the only way. And I think the thing
9:34
Speaker 1: is the buyers always think that times on their side,
9:37
Speaker 1: but it's it's not because I mean, if the Bank
9:41
Speaker 1: England cuts interest rates, it will be because the wider
9:45
Speaker 1: economies deterior rating, and that means that actually much I
9:50
Speaker 1: hate to say that your job might be at risk.
9:52
Speaker 1: Whereas if I think it's crossed, we don't get a
9:55
Speaker 1: big recession, then there's no reason for the banking interest rates.
9:59
Speaker 1: And that means that's is ploy as good as it gets,
10:01
Speaker 1: or as close to as good as it gets for
10:03
Speaker 1: mortgage treats. You know you're not actually crossing your fingers.
10:06
Speaker 1: Oh well, which is kind that right? Neil is waving
10:12
Speaker 1: trying to interrupt. Neil, you don't understand how these podcasts work.
10:14
Speaker 1: You just talk over John when you want. That's how
10:18
Speaker 1: politeness out there. And I just think the January numbers
10:21
Speaker 1: only need to be treated with a degree of skepticism.
10:23
Speaker 1: As John said, we had the mortgage shop in September,
10:25
Speaker 1: but also separate to that, people don't buy houses in
10:28
Speaker 1: January and December, so you got a natural pickup in
10:30
Speaker 1: January anyway, So you know it's again people are reaching
10:35
Speaker 1: for that soft landing thing as quickly as they possibly
10:37
Speaker 1: can to kind of provide evidence that actually it's okay
10:40
Speaker 1: and kind of calm nervous, because well, people talk about
10:45
Speaker 1: real estate like it's an acid a lot of the time.
10:47
Speaker 1: Not now. It's actually the most emotional decision in a
10:50
Speaker 1: way you can make outside the family, and emotions plays
10:55
Speaker 1: a big part of it as the psychology. And so
10:57
Speaker 1: if you're worried the price are going to go down,
11:00
Speaker 1: you're not necessarily going to be rushing guds by a
11:01
Speaker 1: house because you're like, oh my god, I could go
11:03
Speaker 1: wrong and blah blah blah, and and that needs to
11:06
Speaker 1: get work through the system and people some people have
11:08
Speaker 1: phone comfort and interest rates where they are, but for
11:10
Speaker 1: a lot of people that's just too high and they're
11:12
Speaker 1: not going to be able to for prices as they're
11:14
Speaker 1: currently being quoted at at least rather than necessarily setting up. Yeah,
11:19
Speaker 1: I'd say one of the things that I always think
11:20
Speaker 1: of as a massive warning sign is in centers from
11:23
Speaker 1: the house builders. You know when when they really can't
11:25
Speaker 1: sell and they don't want to cut the price of
11:27
Speaker 1: a house because you know that looks bad, right, You
11:29
Speaker 1: certainly don't want to do that. So what you do
11:30
Speaker 1: is you try and cover up falling prices and falling
11:32
Speaker 1: demand by offering people freebees. And we see this in
11:35
Speaker 1: every single cycle. And you get the free kitchen fittings,
11:38
Speaker 1: you get the free bathroom. You're either one getting a
11:40
Speaker 1: bathroom in the first place, and then you build, but whatever,
11:42
Speaker 1: so you get the free bathroom self of the bathroom upgrade.
11:44
Speaker 1: And then then you get the carpets. And I think
11:46
Speaker 1: once you get free carpets, you know all the danger
11:48
Speaker 1: bells are ringing right um. And we always say to people,
11:51
Speaker 1: if someone offers you a free carpet, you're paying too
11:53
Speaker 1: much for the house, so you must definitely offer less
11:56
Speaker 1: for the house. Don't take the carpets, offer less for
11:58
Speaker 1: the house, because that's the way it should be. Them
12:00
Speaker 1: graduated of the cycle, the incentives get bigger and bigger
12:02
Speaker 1: and bigger. We'll pay your mortgage, will pay your stamp duty,
12:04
Speaker 1: will pay this, will pay that, and then just around
12:07
Speaker 1: the bottom and this is the thing we tell people
12:10
Speaker 1: to look after comes the car. There comes a point
12:13
Speaker 1: when one house building company will start offering you a
12:16
Speaker 1: free card by the house, and I always think that's
12:18
Speaker 1: a little bit of a of a buy signal. I
12:20
Speaker 1: don't know, what do you think. I think if anybody
12:22
Speaker 1: ever offers me incentives, I'll say no, I'll take the
12:24
Speaker 1: discount please, particularly with mortgage race to where they are now,
12:27
Speaker 1: and the idea in fact that you're paying for a
12:30
Speaker 1: carpet at four or five percent is a big crazy tautage,
12:36
Speaker 1: Thank you very much. But yeah, cars are a good
12:38
Speaker 1: sign that we're near the bottom. I'm not suggesting you
12:41
Speaker 1: should take the car. I'm suggesting that it means you
12:43
Speaker 1: can get thirty ground off the president. Absolutely. Yeah. But
12:46
Speaker 1: the other problem in the new belts always those are
12:48
Speaker 1: the first ones in which mortgage lending trys, because obviously
12:53
Speaker 1: tends to be if you're buying a new building is
12:55
Speaker 1: normally the fustine buil, and it tends to go for that.
12:59
Speaker 1: And also new builds are already over placed so because
13:02
Speaker 1: they will lose value the same way as a new
13:04
Speaker 1: card does. Um So, I mean it's never it's never
13:09
Speaker 1: a good time for how spelled does because you know,
13:11
Speaker 1: they've just finished building all these things at maximum cost
13:14
Speaker 1: and then they're trying to flog them at a time
13:15
Speaker 1: when the banks are most weary of landing on those
13:19
Speaker 1: specific types of houses as well. Essentially, isn't I've always
13:22
Speaker 1: wondered why, Maybe maybe you can answer this, why do
13:26
Speaker 1: you not have to pay a higher deposit on a
13:28
Speaker 1: new build than you do on a secondhand house, given
13:32
Speaker 1: that the new build is definitely going to lose value
13:35
Speaker 1: in the short term. Tend to look at these things.
13:38
Speaker 1: That's passionately and it's it's based on your ability to
13:41
Speaker 1: repay the mortgage rather than necessarily the property. As long
13:43
Speaker 1: as they're happy with the value you walk into negative
13:46
Speaker 1: ectly on day one are you Absolutely do? And I
13:48
Speaker 1: think that one of the most interesting things that is
13:52
Speaker 1: that we need to watch for the next two years.
13:53
Speaker 1: It's helped to buy and you know that has completely
13:56
Speaker 1: skewed the new home market. It's it's sent the amens
14:00
Speaker 1: and new homes rocketing, So there should be room for
14:03
Speaker 1: builders actually cut prices quite a lot now unless they
14:07
Speaker 1: overpay for the land, which is quite likely. But also
14:10
Speaker 1: those people who bought on Help to Buy are probably
14:13
Speaker 1: in negative equity if they bought recently. But then when
14:16
Speaker 1: it comes to refinance at the end have to pay
14:18
Speaker 1: more in because the government guarantee is disappearing, so that
14:23
Speaker 1: you're gonna have to all these people facing much higher
14:26
Speaker 1: repayments in terms of mortgage payments, but also on the
14:28
Speaker 1: value side in terms of the size of their mortgage,
14:31
Speaker 1: but also on the property where they've lost lots of money.
14:34
Speaker 1: And yeah, I think that's a trend that we're going
14:36
Speaker 1: to really have to watch for the next two years.
14:37
Speaker 1: A lot of people will have made bad decisions are
14:39
Speaker 1: going to suffer badly from it. It's interesting we've written
14:42
Speaker 1: a lot about help to Buy over the years, and
14:44
Speaker 1: you know, we don't need a particularly good idea for
14:46
Speaker 1: anybody except for the house builders. And you know the
14:48
Speaker 1: huge profits that the house builders have made out of
14:50
Speaker 1: life find particularly Um, I'm gonna stick with irritating for now,
14:54
Speaker 1: but do you think that there's any good that have
14:56
Speaker 1: come out of help to Buy? The one thing that
14:58
Speaker 1: it has helped a lot of people who otherwise would
15:01
Speaker 1: not have been able to afford to buy a house.
15:03
Speaker 1: So if you look at the English Housing Survey, the
15:05
Speaker 1: percentage of people needing money from family and friends in
15:10
Speaker 1: order to buy a place that shrunk dramatically in the
15:12
Speaker 1: last few years, and a large part of that is
15:14
Speaker 1: obviously lower interest rates as well. But I do think
15:16
Speaker 1: help to Buy has made some difference there. But it's
15:18
Speaker 1: helped them buy a house that is now going to
15:20
Speaker 1: destroy the well. It can de stritate finances, but only
15:25
Speaker 1: destroy your finances if they actually come to sell, If
15:28
Speaker 1: they can hold through a cycle, then they should probably
15:31
Speaker 1: be okay. But on the issue of help to Buy,
15:34
Speaker 1: I've been running an on growing graphic for probably five
15:38
Speaker 1: six years now called help to Boom, which kind of
15:41
Speaker 1: shows how every single time the housing market starts to
15:43
Speaker 1: turn negative, the government comes in and intervenes and does
15:48
Speaker 1: something to help buyers and support the market. And that's
15:51
Speaker 1: going to be another thing to really watch, whether the
15:53
Speaker 1: government is willing to annoy a lot of its natural
15:57
Speaker 1: voters who have gotten used to their house price going
16:00
Speaker 1: up by pounds a year, and doing some sort of
16:04
Speaker 1: scheme to help booster What is there left? What is
16:06
Speaker 1: their left. They've done everything. And what we've seen in
16:08
Speaker 1: the last cycles that we've lived through, they've been very
16:11
Speaker 1: small cycles that all us all of us seeing because
16:13
Speaker 1: the government has stepped in really quickly with lower interest rates.
16:17
Speaker 1: And one of the things that John and I writing
16:19
Speaker 1: about it, you know, people go, well, house precedent was
16:21
Speaker 1: gone back jud looks like a blip in the great
16:23
Speaker 1: scheme of etcetera. But most of those occasions have seen
16:27
Speaker 1: interest rates full dramatically and access sorts things out. But
16:30
Speaker 1: that is definitely not going to happen this time. We
16:33
Speaker 1: can't have more help to buy what what can they
16:35
Speaker 1: do but in a sort of more tax relief for
16:38
Speaker 1: something old trashion like that, I can't see them doing that.
16:41
Speaker 1: I just think politically it's unpowerful for them to do
16:43
Speaker 1: that now. But I would agree with you on that level,
16:46
Speaker 1: because like back home, just before the massive crash, you know,
16:50
Speaker 1: they cuts damp judy as the last kind of team
16:52
Speaker 1: to keep the market going. And you know, the government
16:55
Speaker 1: keeps on thinkering and stamp judy and cutting stamp judy
16:57
Speaker 1: to keep the market going, and it tends it up
16:59
Speaker 1: for a few months and then reality sets in. You know,
17:02
Speaker 1: these measures do not help people buy houses. They help
17:05
Speaker 1: people who own houses, and so they become more unaffordable.
17:08
Speaker 1: And then you have another announcement designed apparently to help
17:11
Speaker 1: home buyers, but actually they are in effect they help
17:14
Speaker 1: the people who already own homes by sending the values
17:16
Speaker 1: of their properties higher. I have skepticism that they can
17:19
Speaker 1: do at this time. Well it's not that, I actually
17:21
Speaker 1: think the political calculus has changed quite a lot. I mean,
17:24
Speaker 1: the the average to the fostering buyel is like something
17:28
Speaker 1: stupid like and mid thoughts. Now the main money they
17:31
Speaker 1: have is myself that I don't know what only trying
17:34
Speaker 1: with the list sense is. But something like thirty percent
17:36
Speaker 1: or so people win their homes right, even no mortgage
17:39
Speaker 1: at all. About thirty percent have a mortgage, and most
17:42
Speaker 1: of those are people who are already better off than
17:44
Speaker 1: the average. So you have this massive sort of like
17:49
Speaker 1: voter pool of people who are incredibly piste off that
17:52
Speaker 1: they can't buy a house. Um, and you know we
17:55
Speaker 1: talked about they can, you know what they can. Servatives
17:57
Speaker 1: has been a natural party of homeowners, but all of
17:59
Speaker 1: the heartened, largely under new labor in the kind of
18:03
Speaker 1: twenty play, have gotten Brown government and at that point,
18:07
Speaker 1: by this is not a political point. My point is
18:09
Speaker 1: more some at one point it was a massive vote
18:11
Speaker 1: when not to keep house places going up as much
18:14
Speaker 1: as possible. I don't actually think that's the case anymore.
18:16
Speaker 1: I think even people who own houses, like people who
18:20
Speaker 1: are all doesn't noise. I think a significant proportion them
18:22
Speaker 1: I think, oh god, who are my kids going to
18:24
Speaker 1: afford the house? And so okay, they've got lords of assets,
18:27
Speaker 1: but they're realizing, well, I'm going to re funnel half
18:30
Speaker 1: of these half of this, you know, my my pension
18:32
Speaker 1: and all the rest that's going to expand go or
18:34
Speaker 1: in buying my kids a house. So that's not ideal either.
18:37
Speaker 1: So I think also that people with no mortgage, people
18:40
Speaker 1: who are in their houses out right, don't really care
18:41
Speaker 1: where the house prices go up or down. It doesn't
18:43
Speaker 1: make any difference to them. You know, most people, if
18:45
Speaker 1: they understand that they haven't got financing on it, then
18:47
Speaker 1: the price of the house is by good bye. And
18:50
Speaker 1: if house price is full then that doesn't make any
18:52
Speaker 1: difference to their net position. Affect it improves their position
18:55
Speaker 1: if they're going one particular way. So it's it's entirely
18:57
Speaker 1: by the buys to that make any difference except for,
19:01
Speaker 1: as you say, in the context of their children. Yeah,
19:04
Speaker 1: and it's also um, I mean, and again I think
19:07
Speaker 1: it's both. Remember this is a this is a global
19:09
Speaker 1: thing and it's happening everywhere. Um and I mean, which
19:14
Speaker 1: is basically, don't in the fact that, again, this is
19:16
Speaker 1: all a function of falling interest rates, and that is
19:19
Speaker 1: where it fundamentally boils back down to interest rate spiked
19:23
Speaker 1: in October. They are improving now, but whatever they're going
19:27
Speaker 1: to say, it's going to be about twice as much
19:29
Speaker 1: as they were a year ago, eighteen months ago. And
19:33
Speaker 1: unless something insane happens, which would almost certainly involve unemployment
19:37
Speaker 1: traveling from where we are now, then interest rates are
19:40
Speaker 1: not going back to zero percent because that was a
19:43
Speaker 1: one off, that was a five thousand year law and
19:45
Speaker 1: I just don't see how we get back to there again.
19:47
Speaker 1: M hm. Where do you think we're settle now? I
19:51
Speaker 1: think they'll settle above four percent, possibly towards five percent,
19:56
Speaker 1: and anythink about four percent intensively to price falls. So
20:00
Speaker 1: that one so we've gotten all a lot of people
20:01
Speaker 1: who are on fixes because remember a lot of the
20:03
Speaker 1: UK people with mortgages are on fixes two or five years,
20:07
Speaker 1: but the majority on two years, right, So there'll be
20:09
Speaker 1: a lot of people rolling off soon who are going
20:11
Speaker 1: to have a very unpleasant shock. Yeah, it's going to
20:13
Speaker 1: get really tough for people this year. And I mean
20:16
Speaker 1: this is one of the things that might drive the
20:20
Speaker 1: price transparency is the number of people who suddenly realized
20:22
Speaker 1: they can't afford to own their home anymore. I may
20:24
Speaker 1: have to sell and trade down, which is something we
20:27
Speaker 1: haven't really seen in years. We saw no forced selling
20:31
Speaker 1: in two thou and no force selling. So I don't
20:34
Speaker 1: think the bank is going to like intervene and tell them.
20:36
Speaker 1: But I think a lot of people will just make
20:37
Speaker 1: the decision and kind of go, look this, I can't
20:40
Speaker 1: do this, particularly when there's so much general inflation as well,
20:44
Speaker 1: you know, and so many people are being squeezed in
20:46
Speaker 1: so many ways. They just may not have the money
20:49
Speaker 1: to be able to afford a house. We expect a
20:51
Speaker 1: reasonable man full barance from the banks, presumably. I think
20:54
Speaker 1: that will always happen now. I think politically they just
20:57
Speaker 1: the banks that are going to do that. It's they
21:01
Speaker 1: will find ways to extend mortgage terms or find ways
21:04
Speaker 1: to give mortgage holidays and so forth, and that's going
21:07
Speaker 1: to be a trend to watch as well. So one
21:10
Speaker 1: thing that we're having copedet is how to actually get
21:14
Speaker 1: the best mortgage deal. So Neil well he any top
21:19
Speaker 1: tips for for people that are looking to be mortgage
21:22
Speaker 1: just now. I think the main piece of advice is
21:25
Speaker 1: go as get ready as early as you can because
21:29
Speaker 1: mortgage rights are so variable at the moment in all
21:33
Speaker 1: the in all of that terms meanings that the way
21:37
Speaker 1: you get today may not be the way you get
21:39
Speaker 1: in a couple of months, and you can always go
21:41
Speaker 1: back and change it. So get your documents prep ready ready,
21:45
Speaker 1: and get them prep early, and then you can start
21:49
Speaker 1: to look around, usually through a broker's handiest way people
21:52
Speaker 1: turn to, but start to look around for the rate
21:55
Speaker 1: that suits you. I think one thing people don't thinking
21:57
Speaker 1: off about is whether in jet think a little bit
22:00
Speaker 1: more equity can get them to an l TV where
22:04
Speaker 1: they get a much lower rate. And so you do
22:07
Speaker 1: take a little bit of a short term pain in
22:09
Speaker 1: terms of that money going out of your account, of
22:11
Speaker 1: your habit money in your account these days not all
22:13
Speaker 1: of us do, uh, And then using that lower the
22:19
Speaker 1: rate you're pay on an ongoing basis, and I know
22:21
Speaker 1: many people have like saved an awful lot of money
22:24
Speaker 1: just from going from a nine TV to a seventy
22:26
Speaker 1: pcent the TV, or going from a sevent TV down
22:30
Speaker 1: to a sixty percent TV UM. So you know that
22:34
Speaker 1: that's something people really need to consider. So that's just
22:36
Speaker 1: boosting your effectively your to poise it they make active
22:40
Speaker 1: got in the house. Um. And I think the other
22:43
Speaker 1: thing is because we'll recording this a most obviously it's
22:46
Speaker 1: fab beuty and about five months ago mortgage really spaked
22:50
Speaker 1: really badly and they have come down a lot since then.
22:53
Speaker 1: So I think the other thing for people in member
22:55
Speaker 1: is that if you're looking at the own currently based
22:57
Speaker 1: by tables are kicking at ound. You can't get like
23:01
Speaker 1: under fight under four percent for the five year effects
23:04
Speaker 1: for example. I noticed and suggest whenever you go into
23:07
Speaker 1: that conversation, just be a weird of what is there
23:11
Speaker 1: and what is possible? Um. But yeah, I think nice
23:14
Speaker 1: of it. Nearly in good Luck, the last time we
23:18
Speaker 1: saw big waves of fourth selling was back in the
23:20
Speaker 1: early nineties, wasn't it. That was the last time things
23:23
Speaker 1: got really really unpleasant. People totally underwater and having to
23:25
Speaker 1: sell and negative equity and make up the difference, etcetera.
23:28
Speaker 1: And that was one of the reasons why that downturn
23:30
Speaker 1: got so aggressive, as the banks for closing for its
23:33
Speaker 1: properties onto the market, which then drop prices further down.
23:36
Speaker 1: And I think their where that as well. They're going
23:38
Speaker 1: to try and I don't think the essay mind a
23:42
Speaker 1: short sharp fall, but I don't think they want a
23:45
Speaker 1: proper crush. Crush well, the want reputational difficulties of turfing
23:48
Speaker 1: people out. I think it's alwaso worth reminding people, you know,
23:53
Speaker 1: crush gets us back to where we were in twenty
23:55
Speaker 1: it's not it's not the end of the world. It's
23:58
Speaker 1: hard for those people who got if act to buy that.
24:00
Speaker 1: But if we go, you know, it's if you remember
24:03
Speaker 1: in a lot of us were saying prices were overvalue,
24:06
Speaker 1: then it's like when you well, how far do you
24:09
Speaker 1: go before it's a real, real crash. And they did
24:12
Speaker 1: look massively overvalued. I saw a report last week saying
24:16
Speaker 1: on metrics Delane and then Southeast it's probably forty percent
24:19
Speaker 1: over valued. We're not saying they've got a fall, but
24:22
Speaker 1: that's about the metrics. Why would they not full forty
24:24
Speaker 1: percent to the footy percenter a valued why would they
24:26
Speaker 1: not fall fully epersent? Sure, a bit of forbearance, but
24:29
Speaker 1: that aside, the prices normally revert to a mean they
24:34
Speaker 1: you know, they go back to the correct valuation. So
24:36
Speaker 1: everyone says it's a horrible of value, but they won't
24:38
Speaker 1: fall that much, I think, I think outside London, it's
24:42
Speaker 1: possible in certain regions. I think in London the farre
24:45
Speaker 1: money starts to come in, particularly with the week pound,
24:49
Speaker 1: and that's what makes the difference. So that helps your
24:52
Speaker 1: micro find the floor and there will be Asian money
24:55
Speaker 1: coming in to buy properties that look very cheap in
24:58
Speaker 1: their local currency. It's exactly why happened last time as well,
25:01
Speaker 1: where once you had a decline in London prices in
25:05
Speaker 1: local currency, for them it was a fifty decline, so
25:08
Speaker 1: it made sense start buying and they have obviously been
25:11
Speaker 1: some of the more aggressive buyers in the last market.
25:14
Speaker 1: Another thing that might help buil out the market is
25:16
Speaker 1: a lot of private equity funds have been building out
25:19
Speaker 1: homebuilders actually for the last few years, because the homebuilders
25:21
Speaker 1: couldn't sell the properties they had built in. Private equity
25:24
Speaker 1: firms and institutional landlords came in and brought up entire
25:27
Speaker 1: blocks of both discounts of ten to twenty percent, And
25:31
Speaker 1: so there comes a point where actually it makes sense
25:33
Speaker 1: for them on a monetary basis to step in and
25:37
Speaker 1: start buying things. So there's there's floors in London that
25:40
Speaker 1: don't necessarily exist elsewhere. Okay, so London is weirdly safer
25:45
Speaker 1: than elsewhere. But if you had to make a bet
25:48
Speaker 1: on how full house prices would fall across the country,
25:50
Speaker 1: where would you go? Would you be a minus ten
25:52
Speaker 1: percent minus twenty minus thirty clearly not a minus would
25:56
Speaker 1: be towards minus turkey nominal right next year, But I
26:01
Speaker 1: think this one will last long longer, So minus thirty
26:05
Speaker 1: plus a little inflation, so you actually are on minus
26:07
Speaker 1: forty in real terms at least, yeah, potentially from the
26:11
Speaker 1: from the peak. This is a scard man, god man,
26:16
Speaker 1: I is bitish jones On, mind you, that's only real.
26:21
Speaker 1: You're You're on minus twenty nominal minus. The logic for
26:24
Speaker 1: is this, and I think it's important to think about this.
26:27
Speaker 1: Inflation last year was about ten percent. Inflation this year
26:31
Speaker 1: is expected to be seven percent, and then next year
26:33
Speaker 1: depending on who you listen to it might be two,
26:36
Speaker 1: so you're over probably in inflation terms at stage, and
26:40
Speaker 1: house prices have, on top of it, already fallen four
26:42
Speaker 1: percent and we're just at the beginning. So you know,
26:47
Speaker 1: my God is ten saying this. I do think that
26:49
Speaker 1: forty percent in real terms. I got a stress in
26:52
Speaker 1: real terms is a possibility. Okay, well, I think we
26:56
Speaker 1: can probably finish on that. Extremely positive note, house prices
26:59
Speaker 1: in the UK are only going to fall by something
27:01
Speaker 1: in the region of thirty fift in real terms. That's
27:05
Speaker 1: absolutely marvelous. Thank you both, Neil John for your optimistic
27:11
Speaker 1: and positive contributions to this podcast on the nation's favorite subject. Right.
27:16
Speaker 1: Thanks for listening, everybody, Thank you for listening to this
27:18
Speaker 1: week's Marion Talks Money. We will be back next week
27:20
Speaker 1: in the meantime. If you like our show, and that
27:22
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27:25
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27:28
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27:31
Speaker 1: please Thank you to everyone who has done that already.
27:34
Speaker 1: We have some great reviews and John of course goes
27:36
Speaker 1: through those when needle pick me up from worrying about
27:38
Speaker 1: the property market. Thankt. John. This episode was hosted by
27:41
Speaker 1: Me Mary's ms at web. It was produced by Summer Sadi.
27:45
Speaker 1: Additional editing by Blake Maples and special thanks of course
27:48
Speaker 1: to Neil Callinan and to John's topic. Finally, let me
27:51
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