Property Crash UK: THIS Is Why House Prices Didn’t Crash in 2023…

Many were calling for 10% – 30% drops in house prices on 2023.

But it’s not manifested.

And now the 2 major indicies are showing the housign market rising MoM, the community is split as to the legitimacy of the data we’re being presented with.

So just what is going on in the UK Housing Market, and what can we expect in 2024 now the tide appears to have turned…

Let’s discuss.
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So a year ago in fact just about this time last year many of the economists and analysts were predicting that 20123 was going to see somewhere between a 10 and 30% drop in property prices yet here we are at the beginning of 2024 and we haven’t seen quite those drops so in

This video what I want to do is go through 10 of the main reasons why the property Market did not crash in 2023 and at the end we’re going to have a a very small chat or quick chat about what’s going to happen in 202 for but

Before I go on and talk about these 10 reasons I just want to make a comment and that is that as human beings we tend to internalize um our belief systems so um when we are out there watching stuff on social media or mainstream Media or YouTube we are generally attracted to

Things uh that we believe okay or the narratives that fit into the internal belief system that we have and when we have internalized a belief system it’s actually very difficult to change that belief system we have to usually see very concrete evidence of why we need to

Change our belief system and this is really interesting because when narratives start to change we start to see a lot of conflict because that internalized belief system is then challenged okay and people going wait a minute what’s going on something isn’t right here because I’ve been believing

Or had this value system or this belief system that property prices are going to crash in 2023 and and then when that’s not happening a couple of things will happen number one when we start to see information or narratives that contravene or conflict with our belief system it starts to create conflict okay

And that’s it manifests very often by you know sort of arguments and polarization and all this sort of stuff so interestingly um I did a video last week uh the last live that I did um which I titled slightly tongue and cheek um property prices to Surge I can’t

Remember exactly what it what what it what it said there’s a lot of people came on to that in terms of the uh in terms of the comments and were like how could this how could you be talking about this property price aren going to Surge all of the hpis house price

Indices are a load of BS right this is a disgrace and I think that’s a really interesting um observation that we’re starting to see this conflict happening with the belief systems that are being challenged now when even if we see a belief system challenged with empirical

Evidence that there can be no doubt if the you know when we see data that says there’s no doubt that the belief system is now wrong we we then have one of two things happen number one you change your belief system or the second is that your belief system is so internalized and

It’s so intrinsic to you that you will reject the empirical data that you see I’m talking you generically um and this is where we start to look at conspiracy theories um and you know all of this sort of stuff um and I’m seeing a lot on lots of threads at the moment with

People saying look all these HPI house price indes they’re all load of bollocks right they’re all selective it’s the banks lying to us it’s the system is lying to us uh to lull us into a false sense security or or whatever yet when the prices are coming down when the hpis

Are coming down nobody there is saying that it’s selective and Bs but the moment they start showing something going up then all of a sudden it’s all complete manipulation now I would like to draw a line under this and say my view on this I am not saying that we are

Now in property prices going up I’m not saying we’re going to have a meltdown in 2024 I’m saying as I’ve always done on this channel and this is my my core vision for the channel is to make sure we stay on top of as of the data as it

Comes out and analyze it and try and draw our own rational conclusions from the data that we’re looking at and if that means right that something has changed and we’ve seen a pivot point or an inflection point or you know the trends have changed we have to be able

To analyze that and come up with a rational you know sort of conclusion of why it is rather than just saying it’s changed therefore it’s because that does not serve anybody so all I’m saying is let’s look at everything that’s going on let’s analyze what’s

Going let’s try and make sense of it um now uh I can see we are we are live sorry that’s a little bit of a an intro rant um we obviously live so if you can see me and hear me please give me a thumbs up and please find something in

The comments and put something in the comments to say that that it’s all working all right uh for those of you who are new to the channel a big welcome to you in these live streams we look at data um and try and understand what’s actually going on and make sense of the

Market um and one request for you because you know what my aim is if you’re a returning viewer in 2024 is to grow this channel to be able to give as much objective data analysis to enable us to make better decisions um as investors as business owners as homeowners right

Rather than fall for the mainstream and the social sphere narratives cuz I think I’ve always said this oh that’s gone a little bit crazy I need to work out to turn this thing off sorry it’s something to do with with the Apple algorithm creates all these fireworks and stuff um

So uh something that I’ve you know I’ve always said is we have to be objective my vision is to help people make those decisions and we can only make those decisions if we question and then come to our conclusions so what we’ll do is I’ll go through these 10 points of why I

Believe uh the property Market hasn’t crashed in 2023 and then we’ll go to Q&A and have a chat about them okay um and I’ll summarize at the end before we go to that Q&A actually but feel free to play along as we go through if you see something I’m talking about you don’t

Agree with it and want to challenge it challenge it okay if you agree with what I’m talking about put why you agree uh about what we’re talking about um but these are for me the 10 reasons that the property Market did not crash in 2023 let’s dive into it Team all right

So the first first one of these is the amount of fixed rate debt and lag in the system so we talk about this pretty much every time I go live I talk about the Gap that’s the amount of people okay that are still coming off fix rate mortgages and the amount of

Time this takes to filter through oh and by the way just another caveat today I not talking about what’s going on with swap rates and mortgage rates I’m well aware the swap rates coming down mortgage rates are coming down I’m well aware that people are calling Bank of

England for interest rate Cuts we’re not talking 2024 I look I want to look at the last 12 months and analyze that all right so the amount of fixed rate debt the amount of people who are on sub 2% 2 and a half% mortgages and how many of

Them are coming off let’s back all of this up with some data we’re going to go super data heavy right today um and I want to analyze this this is a graph of starting q1 2022 over here the amount of people coming off fixed rate is the uh

Is the red if you like um and you can see and this is by the way just to tell you exactly what the reference is um from q1 since q1 to Q4 2021 okay so basically since 2021 how many people are coming off fixed rate deals uh and we

Can see where we are now is just here we’re in q1 2024 right so even now in q1 2024 we’ve got 5.3 million people here that have come off fix rate deals since 2021 we’re still only 2/3 of the way through how many people are going to be

There by the end of 2027 still only 2/3 of the way through and if we look at this okay we’ve got a load of people here 2.1 mil 2.5 mil 2.8 mil that are coming off in 20122 which was still right at the beginning of the rate tightening cycle

So a lot of these people who’ve come off you know fixed um been in fixed rate debt that’s come off since 2021 right into 2022 could well have fixed on to still relatively low mortgage rates compared to what we’re seeing now so that when we actually look at the amount

Of people that have come off cheap fix rate debt and had to re Finance onto expensive ones it’s still quite a small percentage of the UK householder um UK householders all right so it’s not like everybody is suddenly having mortgage rates triple all at once and yes we log

Into the mainstream media and every day they like to parade somebody else who says my mortgage has gone from £200 to £ 2,421 overnight it’s a nightmare you know I can’t afford it this is not everybody so we have to look at the data set the amount of people that are

Actually doing it however what we can see is this continues so during 2024 we’re going to have another one I think it’s 1.2 1.4 million people come off the cheap debt 2025 we’re going to have more people and it does start to slow down you can see it

Start slow down so we’ve still got more people coming off over the next however many months and actually years okay so that’s the first reason the amount of people on fixed rate debt and the lag that puts into the uh into the system now number two Factor number two or

Point number two is people lengthening their more mortgage terms let’s just before we go and look at the data on this let’s just explain how house prices you know kind of really work it’s nothing to do with inherent value of course there is an inherent value But ultimately houses or homes or property

In this country are worth what people can afford what they can pay for them if people can afford more if they can borrow more the prices will go up if they can borrow Less in theory the prices will come down so there are multiple ways to actually change your affordability

One of the big narratives that went through um in 2023 is the affordability issue with the interest rates going up of course as interest gr goes up if you’re on a variable if you’re refinancing your mortgage is going to go up and therefore you’re paying more for the same amount

Of debt so you can afford less ultimately when you refinance unless you do a couple of these things one of them is lengthening your mortgage terms okay and if we come back to the data and we have a look at uh at this here um sorry

I can’t really um zoom in on that much more um but this is a graph of uh people who are going onto percentage of people uh who are going onto I think it’s 20 more than no it’s 30 a term of 30 years or more okay so look at this half of all

First-time buyers in the UK and over a quarter of home movers who took out a mortgage in the third quarter of this year this is last year obviously um opted for a term of more than 30 years half that that is incredible half of first time Buy ERS are now on mortgages

That are 30 years or more so because you’re stretching out the repayment terms of that debt it means your monthly payments are going to be less which means you can afford to borrow more okay so this of course is another way of increasing your affordability I’m going to I’m actually going to demonstrate

This in a second with some data analysis that I crunched okay so um I’m I don’t want to talk today about what I believe is a massive ticking time bomb that this is going to put into us as a nation um and you know our pensions all that sort

Of stuff 20 30 40 years down the line of course it follows that if you got longer mortgage terms people are taking the longer mortgage terms to be able to afford more with the idea that they’ll repay early okay and that’s the justification it’s like no I’ll overpay

Or I’ll get you know a better job and I’ll pay it off early the problem is that never or very rarely happens because when we’re on that debt we’re just going to keep it if we get pay Rises we’re going to spend it on other stuff right consumer stuff stuff that

Makes us poor that’s a convers ation for another day so number two lengthening of mortgage terms number three strong nominal wage growth now I say nominal because yes I’m fully aware that for most of 2023 and some of 2022 we were actually on a negative realterm wage growth I.E

Realterm wage growth was less than inflation or wage growth inflation adjusted was negative however that’s vaguely Irrelevant in the context of this cuz nominal wage growth was very strong yes we were getting poorer in terms of um uh inflation adjusted wages but of course when we’re looking at

House prices all the indices are looking at nominal house prices so you have to associate nominal house prices with nominal wages we’ll talk about real house prices um at the end or we’ll talk about it very briefly um at the end so when we look at uh nominal wage growth

And I’m just going to try and find um find the right slide and I’ll uh go onto it here if we look at ninal wage growth we can see that um it’s been up at I mean blind me that’s uh covid it was up at

78.9% over here in July 23 8.5% so total pay nominal total pay 8.5% we’ve had strong wage growth and this is of course put a soft cushion in for the affordability of people so ninal wages go up people can afford to borrow more

Okay and what I want to do is I I I’m going to show you this okay I very very briefly put this together um before I came on the live just to just to have a little look and I’ll show you that at the bottom right so up here I

Took these stats from an article that showed um what you could afford based on mortgage payments um at a 2 and a half% interest rate mortgage and a 5% interest rate mortgage based on a 25e mortgage okay so if you’re pay if you could afford £1,000 a month payments on a 2

And a half% mortgage right you could um afford a sorry 2 half% interest rate you can afford a 221,000 mortgage 5% £69,000 so this was an article that was actually saying how interest rates changing from 2 and a half% to 5% is reducing the amount that people can borrow um if they

Are making the same they can only make the same monthly repayments and therefore you can borrow less of course you can buy less of a house or the value of a house and therefore in theory house prices come down Okay so this follows through now what I did with this and you

Might say it’s a load of rubbish right it’s a very quick thing to illustrate point I Googled how much of um our average net pay to people spend on their mortgages and the answer was approximately 35% okay so if we’re spending let’s just use let’s just use this column here if we’re spending

£1,000 a month on a mortgage and that’s 35% of our net pay our net pay is £ 2,857 which is £34,000 annual and I put this into the POI take-home calculator reversed it um that would be an annual gross of £ 43589 worth of gross salary now let’s

Assume just one year of wage growth at 8.5% that takes our wages nominal wages from 435,000 to 4729 with 85% growth now if we net that out this is post tax so again this is going through py Pye calculator to give us an accurate take-home um it’s going

To grow net out at £ 36,000 which is £329 per month which is an increase of £172 per month okay disposable income now I know no you’re going to say this model doesn’t assume that you’re going to spend it on anything else true but if you were just to take that wage increase

That take-home wage increase and then put it onto your mortgage payments okay so disregarding cost of living disregarding food all that sort of stuff I get it right there’s way more other complex factors here I just want to the point you can now afford £ 1,172 per month okay so you could afford

£1,000 per month in your mortgage payments this is capital repayment by the way you can now afford 1,172 what I then did is modeled that on a 5% interest rate so remember they’ve modeled it up here on a 5% interest rate but I’ve also modeled it on a 40-year

Repayment term okay and with that disposable with that disposable income you can spend on a mortgage 40e 5% we can now borrow 240,000 on our mortgage which if we scroll up here it’s more then we could we were be um we we were borrowing on a 2 and a

Half% 25e mortgage okay so I think that just demonstrates the principle and I I ran it through by the way these sales just to prove so you know if you’re if you’re spending £2,000 a month on your mortgage um you know at 40y year 5% interest rate you can now achieve 40 or

You can now borrow 470,000 which is you know 30 grand more than the 25e term at 2 and a half% I didn’t do the last column so I got a little bit bored but the principle is here if you have nominal wage growth and if you extend

Out your mortgage terms you can still afford what you could afford previously on a 2 half% interest rate and that is another reason that has softened the blow um with uh with with the house prices um by the way keep the comments coming I’ll come back to them afterwards

I hope this makes sense give me a thumbs up uh if you think this is logical reasonable and a relevant explanation as to why we have not completely crashed over the last year okay uh we’ve only done three we’ve got another seven to go and I look I know how complex this whole

System is right no analyst or bank or Economist knows what’s going on because there’s so many moving parts and so many macro factors here all we can do is look at these these big picture principles so next one liquidity in savings postco this is a really interesting one

And I think this is going to be controversial I think some people are going to disagree with me here um something that even I was talking about about six months ago is the amount of net outflow from savings accounts that we were seeing um and a lot of it was

Put down a cost of living crisis people’s affordability getting crunched and having to withdraw savings and liquidity to keep paying for stuff um and of course that then gives the narrative that if people having to withdraw the savings they’re really struggling but I’m I’m going to question

That now so I’ve not seen a graph for a while because um I I grabbed the graph where we saw a big net outflow I think it was sort of um I can’t remember here summer last year from savings accounts which the BBC flashed on and this by the

Way and I know I was using a mainstream media Source it came from I believe it came from the ons uh which was The Source Credit why we have to understand what’s actually happening because that outflow is just an outflow of savings accounts it doesn’t say where it’s going

For example could that outflow be from General savings accounts into High um High yielding longer term fixed rate bonds for example or other Investments maybe people are taking their money out and putting it into taking their cash and buying property cheap right we don’t know where that money is going it’s just

Coming out of a savings account so we have to question everything what we what we do see uh when we look at um data is if we look at the UK household saving ratio okay this is a uh office on um on published statistic we can see the

Graph here um that gives us I want to see the if it gives me give us a long term right so the average from 1955 until 2023 is 8.51% and just to explain what this graph is this is the ratio of post tax income that the average person in the UK

Puts into savings okay the and of course this is going to be skewed by higher earners versus lower earners and we do not have the time to startop Breaking this down into demographic banss right this will take months to Crunch all this data I’m just giving you overview

Here we can see that when we went into into covid there was obviously a massive Spike up in the savings ratio because everybody was locked away for the best part of a Year everybody was given a load of free money for not working and we couldn’t spend it right so it all

Went into the savings accounts we then came down um but if we look at it from 22 to now we’ve we’re trending up this graph is trending up and if we compare it to preco right pre-co the savings rate from sort of 2017 to 2020 was

Meaning around 5% we’re now right now at 10 what is that 10 something per 10.3% we are so the actual savings household savings ratio is increasing which shows people are saving more money right now now again unless these stats are complete BS and manipulated by the on

Okay people are putting money away which again supports a narrative that actually we’re not in a horrific and cost living crisis and by the way again just to clarify I’m talking generically across the UK of course this is going to be skewed there are going to be subsets you

Know the lower income demographics are the ones that are going to be really be really be hit by the cost of living crisis the med you know the um middle classes uh depending on how much mortgage they have depending on what they you know probably have some ability to cut back

The rich are going to be getting massively richer because all of that money that came out through covid will be invested I know because you know I did it right I put money into Investments properties that’s all creating Equity it’s creating income and then a lot of people just have cash are

Just sticking it in savings accounts right now and getting a great interest rate on it so of those you know if we go back and look at let’s look at this so we’re literally right now we’re talking 5 to 5.3 million people you know who have had a fix rate

Mortgage disappear and have to refix since all this started think about how many people have no Mortgage in the UK and have chunks of savings I haven’t getting anything from it for however many years and they’re now getting four five 6% in savings accounts you know NS

And I um what was it a 6.3 6.4% bond that was offered a few months ago which huge amounts of people took them up on that so these are all now creating a lot of extra liquidity and income into the system and this money doesn’t just disappear okay so that liquidity in savings

Postco um is effectively now available to go into assets right it can go into um you know imagine Bank of mom and dad who have a load of liquidity and are now getting much better rates on the savings and they got strong nominal wage growth and they’re putting more away and they

Can lend their you know Sons daughters relatives families money for deposits if you have a bigger deposit your affordability again for the mortgage goes you know changes because you don’t need as big a mortgage so you can have smaller mortgage bigger deposit buy more of a house so this again is cushioning

The blow so liquidity and savings post covid okay so that’s kind of people’s personal finances we’re now going to look at some some some other things um so rather than just the personal financing so let’s start with lower transaction volumes this again is that we’ve been talking about um for a huge

Amount of uh the last sort of three months that we’ve been talking about the property Market going into massive sort of paralysis a massive freeze and the transaction volumes have been have been so low if we go and look at the data again we can see uh this is mortgage

Lending rather than transaction volumes I think it’s easier to see mortgage lending um yes we have had a little upti but we’re still well below still here uh we only being trumped by covid mini budget last well not last year now year before last and financial crisis of 20

,08 as to the sort of transaction volume of mortgages being approved so this is Supply demand that lower transaction volume that lower mortgage approval volume means less are being done so demand Supply demand balance is completely out of skew at the moment right people aren’t selling people

Aren’t buying people are sitting on the hands and they’re sitting on the hands because they can because there’s a lack of four sellers we’ll get to that in a little bit why would somebody be selling their house on their nice cheap fixed rate debt mortgage if they if they don’t

Have to right they can just sit there and ride now until the interest rates hopefully maybe come down again so transaction volumes is freezing the market and again stopping it from crashing I’ve said since I started this channel that one of the key things that will cause the market to crash 20% plus

Is a flood of motivated sellers a flood of force sales and we have not seen it okay so um that is reason number five now I do apologize I couldn’t work out on keynote how to um get them to start numbering from six so we’re going to

Have to start from one again um so from one this is just a very quick one um forbearance uh effectively this is uh Banks agreeing with the government not to start repossessions for 12 months after they could do if people fall into AAR again this is not solving the issue

Um but it’s kicking the can down the road and giving people more chance and breathing space to try and solve any liquidity problems or inability to service their debt um if we have a look at UK repossessions data let’s just head over here um let me zoom in on this one I can

Zoom in on this one uh I’m going to ignore the buy toet sector at the moment I just want to look at the residential so this is um the data as to the end of Q3 23 it won’t be long probably 2 or 3 weeks until we see the data for Q4 of

Course we have seen a increase in arear and don’t forget this teal line that’s going up this is the increase in the brat Band 2 and a half to 5% in arear now as I always say when I look at this chart if you have a 75% mortgage that

You’ve just taken out to get in 2 and a half% areas you have to miss five and a half payments five and a half monthly payments okay so there’s so much lag in this because for a start let’s say somebody you know comes off their fixed rate mortgage in I don’t know August

2023 and then they struggle and they just about pay in September and October and then they start missing it we not you’re not going to see that show up in the data until March April 2024 so there’s huge amounts of lag in this but we can see you know quarter on quarter

10% up year on-ear 36% up but it’s still well below historical averages so the areas are going up that’s that’s for sure right there there can be no doubt that areas are going up they’re still not massive but if we look at this graph here number of morgage possessions and

Let’s look at the homeowners we’re actually seeing the trend of possessions of homeowners drop and that is because of the forbearance um and the banks are leaving people alone and actually being vaguely flexible um and you can see these numbers are tiny right if you transfer over here you’re talking like

600 a quarter it’s completely different to the thousands and thousands of people that being repossessed in 2008 okay so forbearance again is stopping people becoming for sellers because they just don’t have to become for sellers right now so another Factor um that is propping everything up for baren cool

Now the next one number seven strong rental market so this is a fascinating one to me I’m just going to try and before I talk about it get the right stat up on here we go so let’s talk about strong rental markets um there are big areas of the UK

Where it is still cheaper to buy at current interest rates and when I say current interest rates I mean where they were at the at the peak of the swap rates last year last sort of Summer still cheaper to buy with a mortgage than it is to rent we’ve seen this

Massive scarcity of rental properties and this is creating a m there’s just a huge supply demand imbalance in the rental sector the PRS private rental sector is without a doubt broken right now if you are a landlord and you know what you’re doing okay and you have things structured correctly it is

I I I I have to be careful how I say this because I don’t want to come across as as um as opportunistic but it’s just business at the end of the day that if you own stuff and you’ve got it structured correctly and you’re not

Being crucified by um section 24 and the high interest rates and there’s various models and mechanisms that I teach my clients that you can use to um to to to get around a lot of that sort of stuff and have much more different you know very different investment models then

Those rentals going up are really increasing the yields a lot at the moment and we were seeing for quite a few years know rental yields just Mac on a macro scale in the property investment World drop drop drop they’re now going up again quite quickly with the

Explosion of rental values now this is not good news by the way I’m not saying this in that woohoo I’m a landlord it’s great to have all this extra rent coming through it’s nice to have it on the p&l but I know on a systemic and societal

Point of view this is damaging right it’s damaging to um people who can’t afford rent people trying to get on the housing L to try and save it it’s just increasing that gap between the rich and the poor right so on societal level I understand this is a bad thing to be in

And we have to solve this problem somehow there are by the way lots of models we can use to improve this and solve this problem um with sort of you know higher density build to rent a lot of other things um and uh you know not

Taking all the rental markets off in you know for sort of shortterm lets um not selling it all off because the government is taxing the hell out of out of you know private landlords lots of E I don’t want to get into that now however what I do want to show you is

This from zuper where it show um this came out let me just see the date on this this was there you go August this was August’s house price index um this red line this red dotted line below it so in all these regions West Midlands East Midlands um sou oh

Sorry no no sorry wrong way around above it Wales Yorkshire and Hur Northern Ireland Northwest Northeast Scotland so basically Midland above the Midlands it is cheaper to buy than it is to rent so of course that is still fueling demand in certain house prices and by the way I

Am absolutely convinced that the way the hpis work and the honic regression model um and you know how how this model is created which is basically it’s almost like CPI model it’s like a basket of goods if you like or a basket of factors that go in for properties and how these

Basket factors sort of get you know um are being changed is going to direct how the average house price in the UK changes so if for example youve got a lot of people going for for smaller properties which by definition in the areas small properties have a higher

Priority per square foot that can skew the hpis it can skew parts of the honic regression model quite a lot so anyway the point is strong rental market is actually pushing people into buying so it’s cheaper for people to buy um than it is necessarily to rent so that’s

Keeping some demand some Demand by the way I’m not sitting here saying this is going to make the property Market surge I’m just saying why it’s not crashed 30% in the last year um number eight not number three number eight is higher stress testing let’s not forget what

Happened in 20 2008 when we went into total meltdown and that’s because in the runup to 2008 in the huge property boom from effectively mid 90s until 2007 2008 um we saw a lot of people able to self-certify on mortgages we saw Banks wanting to lend to anybody there was

Very little in the way of stress testing going on so of course when it all started crumbling down people couldn’t afford you had the ninja mortgages no income no job um you know and the whole system came crumbling down that was a very specific event that happened and after that the financial institutions

Took it on board and we changed the stress testing so to demonstrate how the stress testing um has changed this is mortgage stress testing um versus the actual the actual rates and we can see over the last sort of 10 years or so where the banks have been directed to

Stress test um the rates to so you can see when we got to um sort of the end of 21 when the rates started to go up well in fact before that before we came to the end of 2021 um we were still up at seven sort of 7% right stress testing so

This is this black line down here is what people were borrowing purple line is what the stress test you can see the margin there now as the interest rates came up quickly you can of course see that that margin narrowed quite a lot but still didn’t reach it and then the

Banks have continued to increase their stress testing and I do believe that it’s above 9% at the moment um and then you know we’ve had we’ve had number one spike in swap rates dip down after the mini budget number two in the summer and we’re now dipping down again we’ve got

That margin reestablished now of course because the stress testing is so high this is automatically going to exclude a huge amount of people from the property Market which is another reason and I don’t think anybody’s talking about this this is another reason for me why so

Many um why we’ve got such a crunch in property transactions is a lot of people actually just don’t qualify for mortgages depending on their um depending on their circumstances you you know it’s not even just about income it’s income minus expenses you know everybody who applies for a mortgage got

To do their alley you know assets liabilities income and expenses and right now a huge amount of people will not be qualifying under the current stress testing which is another reason the market is in paralysis so only people who do have mortgages can absorb it and actually a lot of people who have

Got mortgages on a macro level are going to have that liquidity you know all that sort of stuff so um I think that’s a that’s a pretty obvious one that we do have the stress testing in there blind me that’s number eight what about number nine geographical dislocation um it’s an interesting one

And I I I haven’t seen a huge amount of concrete data about it however the premise is this we now live in a society um where already we were going gig economy right so the ability to be much more remote and flexible in where we

Work um you know with the way of running businesses online um people could be more geographically dislocated from the place of work now of course when covid came that’s accelerated that Trend massively with home workking or hybrid working um people are able to now move away further from their place of work or

Just be completely remote and therefore you know do not need to live in London with a with a company working for a company HQ in London or the southeast and can for example move to the Midlands or move from the Midlands up north and geograph geographically relocate to

Areas where the value curve is is more appropriate or better right so basically property are cheaper so you can buy more property for your money um and with that sort of migration we are seeing potentially you know migration from South up to the Midlands and North so a change of demographics which is

Interesting to see how that sort of manifest over the next 10 15 20 years that is another thing that’s uh that’s softening the blow so we have some sort of anecdotal evidence here um and oh no I didn’t find it there was an article from zup I think I might just uh just

Run out of time to find it the zup one don’t worry about it I’ll find it and I’ll post it if anybody wants to see it but there was a zuper one about this geographical so I think they’ve got some data which shows a geographical um effectively dislocation or relocation if

You like wow that’s number nine final one are the regional skews so let’s actually talk about the hpis now so I know a lot of people have been very unhappy with the house price indices right um a lot of people have been saying the data is fudged it’s selective

It’s BS and you know my response to that is it might well be um the honest answer is I don’t know because I’m not going to sit here um looking at thousands if not tens of thousands of um lines of data and actually work it all out but

Something that we have to that I want to say before we look into the hpis is hpis are a model I’ve said it once already this session it’s called a honic regression model these models are not perfect okay um these models have got limitations and just because the model

Says house price is going up or house pric going down it’s very difficult to actually know what’s going on on the shop floor because there’s so many factors that go into this that can skew it all of the HPI so Halifax and Nationwide have both said when you see

The narrative and read in between the lines that because the transaction volumes are so low these models are not actually working as they would usually work so we do have to take everything with a pinch of salt in terms of what we look at with these models I completely

Agree with that what I don’t agree with is just you know people who have an internalization that property Market is going to crash when they see the models go up say it’s all load of bollocks right it’s not that simple so that’s the first thing um is understanding how

These models actually work okay second thing I want to talk about with the models therefore is the uh the the skew so when we talk about the models very often we’re talking about an average so this is this is the Nationwide if you remember Nationwide posted I think it

Was a 1.2% overall drop in the UK housing market in 2023 if we look at uh at the regions we actually see a very different picture so in some regions East angula you see East anglio you’re seeing an almost 6% drop year on year uh we have some skews so Northern irand is

Skewed up 4% rise Scotland is skewed up um what I’m saying here is we need to understand our individual markets we can’t look at the UK housing market as a whole because everything is going to have different you know Supply demand factors different econom factors so many

Things in the mix and this is why data is so important when I when I teach this uh to my clients in where we look for to invest I use a concept called microscoping which effectively is going to a granular level in any area even to a street by street level and

Understanding the market dynamics because in some places you’ll have a road and one side of the road you’ll have completely different economical situation economic situation and housing market to the other side of the road and we need to be able to understand that because if we just use these big

Averages right we’re going to get these vaguely or fairly irrelevant um uh sort of figures that pop out so you know this is the Nationwide we can see um that’s showing a very very different skew um if I look at the Halifax Halifax don’t really publish this I don’t think they

Said something I’m not going to be able to read this uh without my glasses there was something somewhere about regionals but you can see here on the Halifax there is nothing here that shows the different the different regions so it be interested to see Halifax I’m sure it does break it down

Um as to you know the region by region um the other thing is by the way if I just zoom in on this everybody gets caught up with the month on month um I would say and I always say this look at the trends not the month on month here on the Halifax

We have broken a trend line and we are going up that’s why my the thumbnail on my um video last week said house prices boom right not booming or house price surging but they are that is definitely a trend line of course we have to challenge the data of course we have to

Take with a pinch of salt because here’s my belief I do not make predictions right you know if anybody watches this channel regularly my job here is not to say oh I predict in 2024 we’re going to see a 30% drop or a 10% rise okay that that’s for

The people who who want to get eyes on to look at those predictions yes I give my predictions in terms of what I think is going to happen on a trend basis and my predictions on a trend basis for 2024 is we’re still going to see nominal declines in 2024 I said it

When I started the channel last year that 2023 2024 we’re going to see nominal declines um it’s all interest rate dependent and that’s the only thing that is something I will Hammer you know um hammer my my reputation to is that the future of the property market and

I’m going to do another video this week about this um is enti highly not entirely dependent but um the interest rates do have an effect on it now we’ve talked about on this video why the interest rates Rising has not automatically led to a massive crash and

I think I’ve gone through 10 fairly compelling reasons um that have shown or demonstrated why property prices have not crashed in 2023 but I want to leave you with this thought team um I want to leave you with this thought oh no I’m pressing the wrong button sorry too too many screen

Set has it actually crashed that’s the question that we have to ponder and it all depends on your perspective okay because there’s the one graph that I always show that for me is the one that really matters as an investor and it’s this one um and I have

Actually seen um uh the Q4 data is now out I didn’t have time to go and um because I didn’t want to do cut and paste today I just wanted to get some websites I haven’t found on a website but I did dig into nation in fact no I’m

Not going to do it I dig I dug into the Nationwide reports and found the actual um Exel spread with all the data and the graph on it for this to get this graph so it obviously has gone down again but when we look at inflation adjusted house prices okay when we look

At real house prices so the inherent value of a house compared to everything else right that you’re earning um or the value of everything else as far as I’m concerned we are in a crash right we have seen a major crash over the last 12 18 24 months and the reason that’s not

Manifested nominal house price crashes is due to the very strong inflation we’ve had and then that’s led to the very strong wage growth and all the other factors we’ve talked about has masked the fact that in real terms house prices have fallen considerably in value

And I look at that and I look at that as a quite attractive entry point in terms of an you know an inherent value of an asset not just the nominal price tag on it so my personal view is we have seen a crash I’m going to do another video this

Week I’m going to talk about this more and I’m going to talk about what happens next in 2024 um and actually just thinking about this I’ve also uh there’s an 11th one there’s an 11th factor that I’ve not talked about here which actually is is affordability in terms of price earnings

Ratio of house prices um I wonder if we can just find that very quickly in in here let’s just go graphs let’s see if we can find it very quickly uh house price earnings by ratio that looks like it might be quite a data heavy thing

I don’t want to see 2023 I want to see a range somebody might need to help me if I can use all of this interesting data let’s look at first-time buyer house price earnings again not not fantastic um UK as a whole but we can see okay look this this actually serves this

Serves for me Nationwide data okay let’s talk let’s say this is 11 this is house price earnings for first-time buyers we can see that we were hitting almost six in Q2 2022 and we’re down to almost five almost five is the long running average we’ve got since about you know 20 2014

So in terms of firsttime buyers um the house price to earnings ratio has dropped fairly considerably which is something we expected and it’s dropped considerably even though even though house prices have not dropped considerably because of wage growth okay so that’s let’s let’s call that1 there we are team give me a thumbs

Up if that was useful I’m going to go through some questions now that probably went on a little bit longer than I thought it would do thank you everybody for bearing with me um Teddy says refusing to accept new ideas is refusing to succeed totally agree um Stafford I

Did get chased off I’ll put this broadcast in 23 with a whole bunch of YouTubers shouting crash all the time prefer here with the numbers are assessed thank you Stafford always a pleasure um by the way I people say um you know what what do I think would

Create a crash I do still believe if the economy falls off a cliff we will see a crash we could see Pete to trough 30% nominal house price drops if we see a huge economic disaster I personally think it’s more likely that the only the only way we would see those sort of

Figures is a third or an external Black Swan event happening the biggest thing to me is geopolitical risks outside of the UK um you know we’ve got Russia we’ve got Ukraine we’ve got Middle East you know it’s a Tinder Box there that all has the potential to spill over

Into um into you know a horrible mess we’re not there at the moment but it has the potential to the economy is teetering along um it’s it’s limping along um we’re I would say we’re in technical recession but it’s not like we’re seeing a massive recession um with massive unemployment again let’s look

Back at the previous recessions there really are reasons for them you know 2008 was the credit crunch that that was you know a Black Swan event um that came from the banking system uh if you look at something that I’m going to put a video out this week again is actually

The boom bus cycle and how very often when we see massive boom we then see huge bust the thing is we’ve not seen a massive boom in the I’m talking about economy here actually I’m going to leave you with this thought we’ve also not seen a massive boom in the housing market

Everybody says postco we’ve seen this huge boom let me show you this graph because this will weten your appetite for a discussion that I want to have this week about the boom bus cycle if you look at this inflation adjusted house prices okay from there to there is the postco

Boom that is not a boom in my book that is not a boom at all right that to that is a boom that to that is a boom that’s a little tick up so we’ll talk about that this week okay uh oh no sound hopefully we got some sound

Let’s see we’ve got some questions Stafford let’s get the question on coming off fix rate graph 67 million in the UK 33% of mortgages say 22 million of those numbers of fol look come off compounded they seemed high so 22 so those numbers of folk coming off um R

Must be compounded so let’s just get that graph up Stafford so we know what we’re talking about so we’re on the same page you mean this graph here is that the one you’re talking about sorry I’m moving your question around um 67 million UK 33% on mortgages say 22

Million of those I’ll have to crunch those numbers I don’t actually know the answer to that Stafford in terms of it is about I think it’s is it 33% of homeowners on mortgages is that right I I I generally don’t know those stats I’ll will have to crunch those stats and

Get back to you um but these are not compounded this is this is uh this is aggregate if that makes sense so it’s cumulative this is a cumulative figure so we got 7 half million by the end of 2026 I did not answer your question at all there I’m afraid Stafford because I

Don’t the answer to it um let’s see what else we got John do how you doing John let’s see what you we’ve got to say the rise in borrowing cost shelter with longer mortgages and high wages definitely have kept prices stable however there’s still a heavy burden on borrowing and still

Could force price down agree totally agree John absolutely and I just want to clarify I’m not saying here that I don’t think prices will go down in 2024 I’m not saying I think they’re going to Surge up in 2024 um I’m just purely looking at what’s happened over the last 12 months

And trying to make sense of the illogical because a lot of people uh come onto the channel and give me say things like I don’t get it doesn’t make sense we should be 20% down by now we should be 25% down by now 30% down we should be in fullon Market meltdown

These are the reasons why we are not um we could go into Market meltdown this year we could do 100% we could I person I I this is why I say I think long and shallow I think we’ll still have the pressure on um even if interest rates

Don’t start getting cut you know in May um yes that will have a perception that will have a market sentiment um but I don’t think people are stupid and are just going to go suddenly diving back in and overleveraging I don’t think the banks will let them right so I think

There’ll still be downwards pressure this year John saying um I made as much money last year from Bank savings as what I did from rent income uh yeah and I think that’s happening a lot which is why again um you know people are doing things like liquidating

Their Equity heavy Investments now um a question I have and this is something I I started to think about today is there there is a narrative of a net outflow of landlords okay and I agree with that looking at the amount of units that are on the rental market is a supply demand

Issue but is that all because they’re being sold so yes we are seeing a lot of stats with bisect landlords exiting the market or a net buy toet outflow so more people selling than buying but I’m just wondering what data that is based on is that based on private buy toet landlords

With buy toet mortgages because if it is then we’re missing a whole chunk of the um a whole chunk of the borrower space or the or the investor space which are limited companies with commercial mortgages um and I would be very interested to see the stats on that

About how many properties are being bought in limited companies with commercial product or in cash and therefore is the data capturing people who are buying in cash is it capturing for example the institutions that are buying up huge amounts of stuff and you know if we want to talk about conspiracy

I’d rather talk about right the likes of Black Rock Lloyds Barkleys all of these new institutional landlords who are probably coming in and buying huge chunks of new builds at cut prices right now to put into their build to rent you know or sites where they’re going to be

Building blocks of three four 500 Flats on build to rent um this is where I think we should be focusing our attention not on the retail side but actually with this narrative that’s happening and and again if we go back to to this graph right if I look at that as

An investor and go that is that is an interesting entry point okay into into UK property we are historically pretty cheap you know if if you draw it over we’re the same price inflation adjusted as we were in sort of 2002 20 years ago we’re same with the same inflation

Adjusted price as 20 years ago right Cycles generally have a habit of repeating at some point if I was an Institutional Investor right if I had billions at my disposal I would be looking at this going you know long term 5 10 15 20 30 40 years we we we got

A great entry point to come in Hoover up a lot of stuff cheap right and hold it and I’m not sure the stats of buy toet landlords exiting the market are being captured with all of this institutional stuff going on or even like to you know myself right with a limited company

Buying with commercial Finance or or cash I don’t know if I do not know if the stats capture it there we go interesting discussion to have um Tristan says wow 40-year mortgages people never pay uh off their houses and the banks will inherit them you loan nothing very good point Tristan

Um and effectively what you’re doing is probably paying an overinflated rent for a very long percentage of your of your living life to a bank um it’s interesting uh Jimmy Rob do you think prices will rise in 2024 if you had to bet oh Jimmy I can’t I can’t say that

Cuz cuz somebody will come back in 2025 and say rob you bet uh maybe I’ll put a Fiverr on it um oh do you know what if I had to put a Fiverr on it I would say we’re going to be slightly lower at the end of 2024 but saying that

Now I just think the markets do kind of do contrary um and I would not I it all depends on how quickly interest rates come come down if they do start coming down quickly in April May time I think we’ll be up at the end of 2024 I think

We’ll have a pop um and let’s not let’s not forget the fact we are election year and um Stafford you asked was it you Stafford who asked me last time about um does does election year affect uh housing market and I looked into it and generically no it doesn’t really so some

People might sit on their hands until after the election so generally it do but but overall it very rarely affects the property Market I think that could be very different this year for the main reason that um as I said uh last week couple of weeks ago the Tories will be

Wanting to effectively build their campaign on being the white Knights that came in and saved the economy and got us through the cost of living crisis to do that they’ve got to get inflation down and they’ve got to get interest rates down and they will want to get interest

Rates down as quickly as possible number one for that um election campaign and number two because they’re servicing such a huge amount of um debt at the moment and also covering the losses on the the um on the bond selling program so they will want to get those interest

Rates down as quickly as possible that could see I you know it could see a little pop of house prices by the end of this year I don’t know I don’t know Fiverr I don’t mind particularly if we lose either way um so I’m going to go very slight

Reduction um Teddy says don’t think you can apply ta to house prices yeah no I I totally I totally agree Teddy um I I I do the TA with a a very slight tongue and cheek just looking at the trends rather than saying any sort of um proper

Trading analysis as you say the lag is so big nobody is sitting there trading I’m just trying to look at patterns um it’s just easy to sort of say that sort of stuff uh there we go Robin as long as people have jobs and can access funds they will prioritize somewhere to live

If economy crashes they lose their jobs and house prices drop 2008 crash mortgagees DED up yep agree completely with you Robin um Robert said best case 9 for 2024 I I think we’ve probably answered maybe answered that um but probably not all I’m assuming we don’t want inflation we don’t want I

Think inflation and deflation both bring the same sort of issues to an economy uh we want this is why we want steady growth right we want steady economic growth we want steady inflation about 2% it’s why 2% is a target not 0% or minus 1% 2% we need some slight inflation to

Keep things going so depending on whether the data is being fudged or not we’ve got two scenarios number one is it’s inherently sticky and we’ve got systemic inflation that’s going to keep it up at that sort of 4% for a while and keep interest rates where they are

The opposite is if it really is coming down as quickly as as it is I think there is a risk of deflation and that could see interest rates come down much more quickly um which will change things very quickly and again look if interest rates do come down quickly um we will

Inevitably see a big pop in asset prices so that the question is will they you know will the inflation drop down if inflation drops down quickly we go into recession we we’ll go back into cutting interest rates and probably printing some money at which price the asset at

Which point the asset prices will go up there we go sorry team I’ve got to uh probably knock it on the head there hope that was interesting for you um give me a uh give me a final thumbs up if that was some useful info in that I know

We’ve been on for an hour um I pra have to do pre-recorded cuz my diary is fairly busy this week and I’m running a um a training webinar training on Wednesday which was going to do the next live so I’ll probably have to do a pre-recorded and put it out we’ll talk

About real inflation adjusted um house prices uh and if we actually have had a boom and therefore will we have a bust and is that another reason a big macro reason why we haven’t seen an implosion is we’ve not actually had a massive boom even though everybody thinks we have had

A massive boom I’m going to leave you on that thought um as always it’s been a pleasure enjoy your week and I’ll see you Soon