UK house prices set to plummet by 60% | Hacker News Reader

UK house prices set to plummet by 60%

7 pointsJSDevOps11 comments

The UK government has flat out refused to get involved in the private mortgage markets, despite calls from housing experts and economists to intervene in the face of the predicted downturn in house prices.

According to a report by the UK Housing Association, house prices in certain areas of the country are predicted to drop by as much as 60% in 2023, with the South and North West set to be hit the hardest. The report has sparked concerns that the middle classes, in particular, will be hit hard by the downturn, with many facing negative equity as a result of the falling prices.

However, despite these concerns, the government has stated that it has no plans to intervene in the private mortgage markets. In a statement, a spokesperson for the government said: "We believe that the private mortgage market should be allowed to operate freely and without interference from the government. Intervention would only serve to distort the market and could have unintended consequences for both homeowners and the economy as a whole."

The decision has been met with criticism from some quarters, with many arguing that the government has a responsibility to protect homeowners and prevent a potential economic downturn. "The government's refusal to intervene in the mortgage market is short-sighted and irresponsible," said Samantha Jones, Chief Economist at the UK Housing Association. "If house prices continue to fall, it could have a devastating impact on the economy and on the lives of many middle-class homeowners. The government must act now to support the housing market and prevent a potential crisis."

Despite the criticism, it seems that the government is unlikely to change its stance on the issue, leaving many homeowners in uncertain times ahead.

> The government must act now to support the housing market and prevent a potential crisis.

When house prices were going up in the past decade, property owners were getting richer while doing nothing, landlords were collecting higher and higher rent and regular people were priced out of owning a home, the government did nothing. But now all of a sudden it should intervene because prices might go down?

Exactly what I was thinking.

When prices were soaring, so many middle-class people were forced out of the market. No one cared about "economy" then.

But now that the prices are going down and actually become affordable to many, some are worried they might lose out on their "investment". Thus the uproar.

I don't disagree, and I also don't think the report is true but I think your comment might miss some hidden dimensions to this.

First, if you go up by 60%, then down by 60% overall you have gone DOWN by 36%. That's quite a bit (1 * [1+0.6] * [1-0.6] = 0.64). Percentage change cannot just be netted off on a +/- basis even if it seems that way for small changes...

Second, I agree owners have enjoyed a decade of unearned rises. But only people who have owned for that long. I bought 7 years ago, it's gone up 60ish % in that time. If it goes down 60% now, that's my luck and I will eat it. But what about someone who bought yesterday? Should the market suffer a big drop, I don't think it would be unfair for the government to assist recent (last 5 years?) buyers.

Third, high house prices lead to building. We then step on the hose by refusing to build infrastructure and restricting planning permission and subsidising people to stay in homes that are too big for them and they cannot afford. But we won't stop doing those latter things. So if prices drop a lot, building will stop and the shortage of available housing will get worse not better. Similarly anyone in negative equity will likely have no option BUT to sit there and hope it gets better, further reducing supply. Also falling prices means lenders will charge much higher rates and demand bigger deposits. This will further reduce the effective supply. Could you buy a mansion for 100k? Not unless you have it in cash if no one will lend to you...

The same point applies to rent: if your landlord's mortgage goes up, so does your rent. And you don't even own it.

Forth is the political dimension. No one cares about 5%. But I don't think the UK political or economic system could tolerate a 20% (let alone 60%) drop. There is a scene in (I think) Yes Minister where the PM says a minister has his full support and everyone knows they will be gone by the end of the day as a result. "We believe that the private mortgage market should be allowed to operate freely and without interference" will mean nothing the moment 51% of people want a cheaper mortgage. Of course that's just my cynical opinion.

Good. Housing is a pipe dream for a person earning the median wage in too much of the UK already.

Median wage in London is <35k. For a flat you're looking at 300k+ minimum.

If people invested in owning 5 houses to flip at a profit and their investment goes down in value that's just tough luck.

I highly doubt that a drop of this magnitude will happen.

Currently what's weighing on the market is mortgages, both availability and rates with both actually easing a little. But there are still plenty of people who want to buy and who have the income to pay current-ish prices and if prices drop a little bit they will gladly snatch what they can.

We've seen that in 2008-2010. Crappy areas get hit, desirable areas not so much.

Exactly. My bet is some areas will decrease 60%, and some will have slower increases (second order) but not decrease.

The OBR is forecasting a 1.2% fall in UK house prices in 2023. They rose about 10% this year.

Estate agents seem to be predicting between 5-10% fall next year.

And I can't find an organisation called "UK Housing Association". It's also a very unfortunate name given, well, UK housing associations.

TBH this all looks a bit made up. I don't suppose you have a source that's not a text generator?

I think the dynamic in the UK that is much different than the US is the term on the mortgage. In the UK I believe it is a forced renewal every 5 years?

In the US having a 30 year fixed rate mortgage means the price fluctuations are all on paper and unless you are in the market they mostly don't matter at all. Sure if my house went up 50% in the last couple years then on paper that's awesome but I'm not selling anytime soon so it doesn't matter. Now if people are taking out home equity loans to extract that equity and do _something_ then they could be upside down on that house if the value drops.

Correct. You usually fix for 2, 3 or 5 years or not fix at all and just pay BoE rate +X bps. It's technically possible to fix for 10 but few do.

I think for the whole "interest rates control inflation" thing to work you need some exposure to it. The Australians have a different model: you fix some of the mortgage and the rest varies with the official rate.

It's interesting how different places ended up with quite different models...

> In the US having a 30 year fixed rate mortgage means the price fluctuations are all on paper and unless you are in the market they mostly don't matter at all.

It matters for annual property tax. Rightly or wrongly, persistently low valuations negatively affect local economies in a shorter time frame than 5 years.

Source?

Reply on news.ycombinator.com