Just been reading all this stuff about a potential house price crash, and can’t believe the amount of naïve people who seem to think that the market will become flooded with bargain houses!
Last time the market crashed, the interest rates were sky high, so obviously lots of people had their homes repossessed, but given that rates aren’t set to rocket again, then this time any crash will have different circumstances.
Let’s go for a hypothetical 40% price drop; this would leave many people with negative equity, so they would either stay put, or if they HAD to move, they’d just rent their house out, or buy another property before selling theirs. This would lead to a shortage of houses for sale (not good – as we already have a shortage due to people living longer, immigration, split families requiring 2 homes etc…), which would then make prices rise again due demand to buy being far higher than availability.
Ok, so some people have borrowed ridiculously against their salaries, but so long as they can keep paying their mortgage and not default, then they won’t be repossessed.
Personally, I don’t think this crash is going to happen. House prices may stand still for a few months, or rise much more slowly, but a lot of it is wishful thinking from those who can’t afford to get onto the ladder.
If prices do crash, then I think there’s going to be rather a lot of disappointed people who were expecting to snap up a bargain and get their foot on the ladder!
MBF has been in the office all day today! If I go chat to our secretary, I can get a much closer look at him!