In this video I go in depth and review whether the Housing Market About to CRASH, i review both sides of the argument, so whether the market IS going to crash and why it ISN'T. I also investigate some different viewpoints from real estate agents and housebuilders.
Why the market IS going to crash - 00:00 - 03:55
In 2008 the new ARM's kicked in causing mortgage rates to increase, which caused millions of people to lose their homes as they couldn't keep up with their repayments. 2008 was also the time of the sub-prime mortgage crisis which meant that banks were left without much funds and had to cut back on lending. This caused an oversupply in stock and a reduction in demand and therefore causing the Housing Market to Crash.
The price of most products follows the supply and demand ratio, where if supply increases and demand goes down, the product gets cheaper. If supply reduces and demand goes up, prices get more expensive.
In 2020, as a result of unemployment and death rates increasing, there is an increase in supply of homes going onto the market. Also, as people are losing jobs, the demand is also reducing.
Why the housing market ISN'T going to crash - 03:55 - 07:10
Because there are no variable rate loans kicking in, there is no sub-prime mortgage crisis, no risky loans etc. the banks have an abundance of money to lend. In addition, as there are millions of people stuck at home, lots of people will be scrambling to buy a new house after the lockdown for a change of scene or for a new home office. In addition, the government have implemented furlough measures to combat unemployment and also delaying mortgage payments gives people the ability to find a new job before they lose their house.
In addition, there are currently 30,000 deaths from the pandemic in the UK which is significantly below the housing requirement of 345,000 homes each year.
What are the Estate Agents saying? - 07:10 - 08:14
Knight Frank expect a 3% decrease in 2020 and a 5% increase in the value of homes in 2021. Other estate agents also expect similar movements. There is very little mention of huge 30-50% market drops.
What are HomeBuilders saying? - 08:14 - 10:41
HomeBuilders currently cant build new houses as a result of the lockdown. The housing requirement in the UK is 345,000 homes per year. In 2019, House Builders built 240,000 new homes. If the lockdown continues to the end of the year, this will mean only 2-3 months of proper production and as such only 40,000-60,000 homes will be built in 2020. This is significantly less than the requirement for homes and even with the additional deaths and unemployment is likely to potentially not even reach the requirement for new homes, let alone over-saturate the market.
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The information in these videos shall not be construed as tax, legal, insurance, construction, engineering, health and safety, electrical or financial advice. IF stocks or companies are mentioned, Thomas MAY have an ownership interest in them -- DO NOT make buying or selling decisions based on Thomas' videos. If you need such advice, please contact a qualified accountant, solicitor, insurance agent, contractor/electrician/engineer/etc. or financial advisor.
This is not an advertisement of property for sale and shall not be construed as anything other than an opinion for entertainment purposes only.
#MarketCrash #PropertyInvesting #HousingMarket
Why the market IS going to crash - 00:00 - 03:55
In 2008 the new ARM's kicked in causing mortgage rates to increase, which caused millions of people to lose their homes as they couldn't keep up with their repayments. 2008 was also the time of the sub-prime mortgage crisis which meant that banks were left without much funds and had to cut back on lending. This caused an oversupply in stock and a reduction in demand and therefore causing the Housing Market to Crash.
The price of most products follows the supply and demand ratio, where if supply increases and demand goes down, the product gets cheaper. If supply reduces and demand goes up, prices get more expensive.
In 2020, as a result of unemployment and death rates increasing, there is an increase in supply of homes going onto the market. Also, as people are losing jobs, the demand is also reducing.
Why the housing market ISN'T going to crash - 03:55 - 07:10
Because there are no variable rate loans kicking in, there is no sub-prime mortgage crisis, no risky loans etc. the banks have an abundance of money to lend. In addition, as there are millions of people stuck at home, lots of people will be scrambling to buy a new house after the lockdown for a change of scene or for a new home office. In addition, the government have implemented furlough measures to combat unemployment and also delaying mortgage payments gives people the ability to find a new job before they lose their house.
In addition, there are currently 30,000 deaths from the pandemic in the UK which is significantly below the housing requirement of 345,000 homes each year.
What are the Estate Agents saying? - 07:10 - 08:14
Knight Frank expect a 3% decrease in 2020 and a 5% increase in the value of homes in 2021. Other estate agents also expect similar movements. There is very little mention of huge 30-50% market drops.
What are HomeBuilders saying? - 08:14 - 10:41
HomeBuilders currently cant build new houses as a result of the lockdown. The housing requirement in the UK is 345,000 homes per year. In 2019, House Builders built 240,000 new homes. If the lockdown continues to the end of the year, this will mean only 2-3 months of proper production and as such only 40,000-60,000 homes will be built in 2020. This is significantly less than the requirement for homes and even with the additional deaths and unemployment is likely to potentially not even reach the requirement for new homes, let alone over-saturate the market.
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Subscribe for more property related content - https://youtube.com/channel/UCRTndpz_fpcVcoVe0QF1IgA
The information in these videos shall not be construed as tax, legal, insurance, construction, engineering, health and safety, electrical or financial advice. IF stocks or companies are mentioned, Thomas MAY have an ownership interest in them -- DO NOT make buying or selling decisions based on Thomas' videos. If you need such advice, please contact a qualified accountant, solicitor, insurance agent, contractor/electrician/engineer/etc. or financial advisor.
This is not an advertisement of property for sale and shall not be construed as anything other than an opinion for entertainment purposes only.
#MarketCrash #PropertyInvesting #HousingMarket
I feel that due to Covid and businesses closing, staff working from home, no need for offices in town, that this is going to spread wealth around the country, pushing up prices next year …I was working in music in central london, we now work from home permanently as we don’t actually neeeeeed an office, so I have bought my first home this month in Hampshire.
Love your channel x
Thank you
Very good video, I have subscribed 👍
Part two please!!
housing is the most unaffordable its ever been, this plus the pandemic and the death of commercial real estate will definitely lead to a crash in residential real estate and stocks and autos, look out below
Probably will be a slow motion crash but area specific and lots of bazaar price variations ie big drops in some cities and price rises in others ,I don’t think much will happen this year as transactions need to play catch up and lock down lifting will bring the feel good factor back vaccine etc this coupled with government financial support and new job creation low interest rates environment will help to sort of postpone the crash until next year .The stockmarket is still bullish and on track to make new highs house prices have bee a little depressed over the last 2 years anyway first time buyers are impatient now and itching to buy.We are only a small island with a large expanding population and a shortage of new builds so I am not confident that we will get a 40% crash but timing crashes is hard work 😀🙏🏼
Thanks Thomas
10 mins analysis not necessary. house prices are dependent on banks willingness to lend/provide mortgages. UK still in a supply shortage so it all depends how available mortgages are.
Personally there will be a crash but it will be delayed, compared to previous trends due to furlough and the forbearance implemented. Lastly the global demand for items will fall which will result in a large job loss over the course of 4 to 12months. Once impact truly kicks in because its currently on pause in a sense but as you stated household income will drop on top of higher unemployment so might be a demand for it, but people just won't be able to get a mortgage
Cool video 😃
Really good analysis. I think the big price falls are over hyped as there is still an underlying housing shortage particularly in the SE BUT other areas will take a long time to recover. There are still many areas that are still underwater from the 2008 crisis!
We are on the precipice of a greater depression. Before Covid19, the 2008 financial crisis was just about to reappear and then they shut the world down. BA are laying off 12k workers and a bloke on TV said the industry could lose £240B this year and additionally 24 million workers are at risk…
Small businesses are being decimated… The rumours are – those that have been lucky enough to be furloughed risk facing redundancy when they return. Unemployment will be off the charts and GDP isn't even measurable.
The BOE are printing money at an insane rate to pay for this… that will have to be paid back by the taxpayer for generations… Higher taxes, higher unemployment and the 2nd and 3rd wave of Covid19 are NOT going to push house prices UP.
It will take a few years to play out, but this pending housing crash will make housing as an investment unpalatable for a generation. If the CEBR are saying the UK housing market will decline -13% this year, you can bet your last dollar it will be 20%, then… there's next year… it's a waterfall event.
Prices are dependent on supply OF CREDIT not houses. No credit, fewer bids.
House prices will not crash regardless of what house crash wishers believe. It's astounding how many people don't get the basic law of supply and demand. Even if prices fall as much as they want, how many would qualify to buy, with tightening lending standards? Competition to buy would be fierce with institutional investors swooping in and snapping up properties with cash. Very unlikely to crash.
Like your calm style ! So if you had a pot of money ( maybe you do ) would you buy a house now ?
You have no idea about economics. Demand and supply is not a fixed ratio, it depends on price. At a high price, there might be no demand at all, even if there is actually a lot of demand, but at a much lower price. That’s what could happen with house prices.
At the same time… lots of people are subprime in the UK:
– Because most people have ARM. “Fixed” mortgages rates for a few years in the UK, which resets to the very high standard high interest rates.
– If you buy a property at a very high price with 5% deposit, it’s the equivalent to a 110% loan when prices were more affordable.
– People have been lying in their mortgage applications. I know lots of people who fake their applications, telling they had less debt or more income than in reality. Self cert is actually very common in Shadow Banking loans for UK residential property.
– Most BTL landlords cannot service their own properties without tenants. That’s because their income isn’t really considered when they get a mortgage, they consider the potential rates. If tenants leave (which is what is going to happen with foreign students), they are going to get destroyed.
– AirBNB landlords can generate A LOT OF supply in both sales and rental markets. They have absolutely no chance of surviving with the same business model as before.
Other topics:
– Banks are lending a lot less and they are withdrawing the high LTV loan, as the Bank of England report shows. The number products have dropped by half and it’s still decreasing every week.
– The worst scenario is that epidemic will have second waves… just looks at the evolution in Brazil, Ecuador, Russia or Pakistan. They have their situation out of control and can be the sources of new breakouts in the future.
– The furlough scheme is ending in June…
At the same time… you have selected the forecasts you preferred. Lloyds has a worse reasonable scenario of -30% and BoE of -16%. RICS survey predicts worst falls in record…
My bet? -40% in five-ish years, just like in Spain back in 2008-2014.
You missed the biggest factor….Divorce!
I think the last 2 months will have increased that factor by a huge amount!
this is not an economic crisis house prices will drop after Brexit !!
Appreciate the info in this video. I’m halfway through buying a flat in zone 2 London atm and it still seems like it’s on track atm. Mortgage has been approved by underwriters but valuation had to be postponed! Fingers crossed they don’t value it super low when this reopens, don’t want my sale to fall through. Can you do a video of inner London projections? My property is NW8
Another great video improving every time !
I've been looking for a more comprehensive video about the housing market, yours is better than many. However, I think, you can show evidence of the data you're basing your prediction on. It will make you more credible (check out another favorite of mine @pensioncraft for ideas) or at least flashes of evidence with circled data.
There are other elements that I think will cause a further drop to the housing market than your prediction:
1. Lot commercial properties will be turned into residential
2. Increase in of rental properties = drop in rental prices – due to drop in home and oversea students (pandemic effect in china and rest of the world)
3. After the furlough scheme, we're likely to see an increase in unemployment (especially in the hospitality, leisure, retail and holiday sectors).
4. Most people are not taking account of people's other loans such as cars… the potential increase in defaults rate after the 3 months holiday period and its secondary effect in remortgaging.
I'd like to see your video but please check how pensioncraft gathers data and uses it to back his points. I know you have limited time but flashes of them and a quick mention of where you got them will separate you from the waffle others do.
Great video cheers Thomas!
In 2008 property crash house prices in the UK fell 29% from their peak I am a landlord with eight properties but I cannot see it at all possible this crash will be better prices are already have surpassed previous highs Consumer credit government debt mortgage debt and car finance are at record highs. Or close to this bubble will be worse more businesses will close in this recession more jobs will be lost more people will be affected confidence will be lower than 2008 and my estate agent has already said mortgages are being withdrawn and Only hire deposit credit it’s available I think there’s a good chance it will be a 40% decline in house prices if there is no vaccine found quickly but as I said I do not want this as I am also a property investor anyway That’s my view
Great info there. Really good point at the end regarding the manufacturing of homes taking such a hit. Would love to see a part two!
Hi yall
That maybe truth in England. But here in the States. The unemployment number is closer to 40 to 45 million. I see a lot of foreclosures on the horizon
Thanks for the quality information mate
One thing you dont mention is first time buyers. Many will be scared off and without them no one can upsize and the market stalls. I predict a 10% drop by the end of the year. And depending on the scale of job losses and repossessions it could be more.
Love to see the progression of the videos. This videos lighting looks a lot better? I love the various different approaches that you went through too. Also the comparisons you made when talking about high and low demand was great, really simplified the idea. Keep it up
Part two suggestion. How do rental prices work in relation to house prices and the economy in general. First example, do rents increase in a recession? When house prices fall, do rental prices fall at the same rate?
I think once the economy re-opens there will be a gradual decline in property prices over the coming months as people begin to accept the reality that their property will not sell for what it may have previously. The property market is a lagging indicator of the economy and the world economy looks to be in a very dark place at the moment. Many businesses are going to fail or change how they operate. Unemployment will likely rise to levels not seen for many years unfortunately. Social distancing measures look to be a part of our lives for the foreseeable future until a vaccine is developed. It is hard to predict where property prices could end up. With the amount of money printing and stimulus programmes going on, we could see high levels of inflation return which would reverse the declines and sent property significantly higher in the medium term.
I agree with what you are saying Thomas even though am not to happy about it since am just getting started in property and would love a nice crash in prices before I buy, but you never know, maybe sellers with negotiate slightly more just to know that they are safe and getting cash in the bank
I’d recommend anyone who liked this video to listen to the Property Hub podcast. I’ve enjoyed all your videos so far, Thomas. The only thing I don’t like are the picture on the front of the videos, (thumbnails?) it looks like a click bait and tacky, IMO. Only constructive criticism because I enjoy the content. Keep up the good work
People are also taking mortgage holidays this should stop a lot of repossession
Do you think the housing market is about to crash? if so, what size drop do you expect?