Effect of budget on house prices

Kerly

Anyone got any ideas on how the budget measures will effect house prices?

super_furry

Well the most obvious is that, with people having less money coming in, they'll take a hit in the ammount of money that they're approved for in a mortgage. A lesser spending power from the few people that are interested in buying will mean that prices will have to come down further or propertys will remain unsold.

The cap of seven years on mortgage relief may leave people who bought their property six or seven years ago in a vunerable position too.

johnnyskeleton

TRS is reduced slightly and it has been indicated that it will be dropped completely in a few years. This should decrease the price of a house long term.

However, developers will still try to sell people houses at the moment on the basis of historically low interest rates (which will probably rise in 2-3 years as the EU recovers), teaser rates and the TRS that will be going.

More generally, people will have less money to spend.

Theoretically the banks will have more money to lend out, although I expect they will be still highly conservative in their valuations in property.

Overall, I don't think it will do much to halt the drops in house prices, and it makes it all the more risky to buy now. It might increase the chances of getting credit from a bank, but I anticipate nothing like how it was over the last 10 years.

gurramok

Everyone's income tax(income+health levies) has gone up by 6%+ since Sept, so thats 6% less income available..
plus as well as industry paycuts(private sector paycuts & public sector levies) hence less mortage amounts that can be obtained and as everyone is on the same boat, house prices will continue to fall to reflect this.

johnnyskeleton

gurramok wrote: »

Everyone's income tax(income+health levies) has gone up by 6%+ since Sept, so thats 6% less income available..
plus as well as industry paycuts(private sector paycuts & public sector levies) hence less mortage amounts that can be obtained and as everyone is on the same boat, house prices will continue to fall to reflect this.

This raises another side point, which is that we have traditionally measured the amount that could be borrowed (other than in boom times) as a multiple of gross salary. Therefore, the amount that can be borrowed shouldn't change due to tax increases, although it will be harder to repay these loans.

nesf

House prices are very likely to continue to fall simply because given the climate few people will be willing to take on new or extra debt. There is a point at which they'll become too cheap to miss but it's anyone's guess where that point will be right now given the uncertainty over the unemployment rate, future income in general and the amount of deleveraging that most home owners will need to be doing over the next few years.

professore

The amount of reposessions will also increase dramatically once this 12-month stay of execution expires and these cuts kick in on people currently struggling. Expect average house prices to touch sub 100 K.

gurramok

johnnyskeleton wrote: »

This raises another side point, which is that we have traditionally measured the amount that could be borrowed (other than in boom times) as a multiple of gross salary. Therefore, the amount that can be borrowed shouldn't change due to tax increases, although it will be harder to repay these loans.

I thought most institutions base their borrowings on net pay?

There is no point flogging mortgages to people who have car & personal loans pre-tax rises simply based on gross pay.

Anyway, it has been the middle(double income) and upper earners who have been able to afford houses in urban areas during the 'boom'(2003+) and its this bunch who have been hit hard hence todays prices will come down to reflect this new reality.
(the lower earners used the affordable housing schemes.)

Throw in the other factors of the equation, the others been oversupply, jobs, debt etc, the only way for house prices is down by alot.