rossyboy

iTrader: (8)

Thats where supply and demand will kick in again though. Yes the prices will fall and by a fair bit, but there is still huge demand for properties from FTBs itching to get their own home. Once they sniff a relative bargain, they'll all come back onto the market.

There simply isn't the supply to provide everyone on average salaries with 3 bed semis who want one. Especially while interest rates are not at 8%+

john banks

Since August 2007, the average house in the UK has lost £15489 House price falls are worst for 25 years - Telegraph

In other words, £397 per week.


The median salary in the UK for a full timer worker was £457 per week in April 2007 National Statistics Online , add 4% to make it about £475 in 2008.


After tax, the average house is losing value at a higher rate than the average person earns.

Henrik

iTrader: (5)

Cool, my rent is 201 per week, including maintenance

Edit: shouldn't be gloating, sorry.

Iwan

Mate of mine is a mortgage advisor, I asked him the other day how business was.

He just gave me one of those dark looks and said "pretty dire basically". All he's doing atm is re-mortgage stuff for people coming off fixed rate deals and trying to shop around and get a cheaper rate - but there's very little going atm.

He's normally quite upbeat but seems genuinely quite worried these days.

P1Fanatic

Thats great for you but for most that isnt possible. £800 a month would get you a 2 bed terrace, 3 bed if you look somewhere rough around here.

Simon

john banks

Yes, but £400k wouldn't buy you a big house in Berks either at present.

Good rentals seem available in lots of places, this one was linked on HPC earlier at £1500 per month:

UK Estate agents with homes, houses & property for sale on rightmove.co.uk

Also for sale at £795k.

moneys

iTrader: (5)

ive never understood renting, 800 a month is a 120k motgage so why not buy somewhere and at least then its not dead money

Henrik

iTrader: (5)

1. To buy anything where I live is 200k+

2. Is interest payments not dead money as well?

3. According to John Banks house prices are falling on average "In other words, £397 per week." This seems like proper dead money to me

4. The rent is less than paying an interest only mortgage, with *no* maintenance costs at all (broken boilers, leaky taps, dodgy electrics etc etc)

Paul3446

Quote:
"Cool, my rent is 201 per week, including maintenance

Edit: shouldn't be gloating, sorry. "


No you shouldn't, when house prices fall, rents go up. If no-one is buying there is more demand for renting, so prices go up!

Henrik

iTrader: (5)

that's ok, when they've fallen 30% I'll buy

shamrock

I know this has been said many times before but I'll say it again. A property doesn't have to fall by the same perctange that it rose by to get back to the same value.

Your example is a 40% increase. A fall of 29% would wipe out that increase.

Not if there is an oversupply of properties, such as the flats in cities like Birmingham.

PeteBrant

800 a month will get a you a decent 2 bedroom place in a nice area.

Good luck buying for that.

StickyMicky

agreed, it was going to cost me more to buy the apartment across the communal thingybob to me per month, then it costs to rent the one i have now

plus mine gets the better sunshine all day

Jamz3k

£120k in my area would get you a 2up 2down ****box. Just like the one i currently rent. But I only pay £375 a month BARGAIN!

I'm really glad i didn't buy a house as planed last year because financially i would have been totally crippled as i am struggling as it is at the mo as it is.

john banks

Renting is indeed dead money during some parts of the house price cycle. The opposite couldn't be more true at the stage we are at now.

My buy signal is when an interest only mortgage is less than the rent (they were about the same 10 years ago when I bought last time). The maintenance and insurance costs probably offset the lack of freedom you have to improve a rented house. Doesn't matter if rents go up or prices come down. Rents are unlikely to rise dramatically unless we have a wage-price spiral. If that is the case then house prices will drop dramatically in real terms.

PeteBrant

Spot on

al4x1

bet you don't have the ***** to, if you didn't buy in 2003 why should it be any different this time

Other than the house would in theory be the same price as you could have bought for last time round, except all this rent would have been put towards a mortgage. Makes me laugh at times the non buyers out there, be interesting to see this thread next year

PeteBrant

Because maybe he wasn't in a position to buy in 2003?

Funny thing time, someone that was 13 in 2003, would now be able to buy a house. They might have struggled to buy in 2003 though.

Maybe he was earning £5 an hour in 2003 and is now earning £500 a day.

Could be a multitude of reasons, and has decided that he would have to be a an absolute pilchard to buy a property at the moment.

cookstar

iTrader: (6)

It's not quite as simple as that, he may have not been in the position to have bought then.

I know I wasn't 5 years ago I earnt one third of what I do now.

lozgti

I think people who rely on the 'demand'argument have a poor argument.

Doesn't matter how many people want houses,if the house is financially out of everyones reach it will never sell.

In reality all houses have been to expensive for us to buy but the lenders wangled the lending something silly.

They can't or won't do that now

al4x1

except on page 1 he said he could have bought,

We'll see theres a lot of fallout still to come how much is media led is yet to be seen. We've agents round here that didn't sell a single house last month, price isn't even the issue its purely that people want to see where this is all going

PeteBrant

He said he would have had to stretch to the lmit to afford it, it could be a completely different situation when the market bottoms out.
Of course price is the issue.

If they dropped the price to a point where people felt it was a safe bet, they would buy them.

It has absolutely everything to do with price.

cookstar

iTrader: (6)

Me and my partner have set a price out in mind, if and when the price drops to that level we will go for it, regardless of whether it may drop further or not.

Paul3446

Pete, why not just let him answer the question, rather than putting up hypothetical scenarios on his behalf?

cookstar

iTrader: (6)

Why are his posts being negged, I see no reason why they should.

PeteBrant

Because, I was contesting that it was not the case that the only reason you wouldn't but a house in 2003 was because "you didn't have the *****".

john banks

Of course price is the issue. If you use fundamentals like rental yield and earnings multiples you simply wait for the price to be right. Volumes go down when the gap between buyers and sellers is too great. It is always sticky on the way down.

Do I feel bad that I sold about 5% below the peak? No. Will I feel terrible if I miss the exact trough? I will aim for it, but there will be some elasticity about it in local markets and deals on individual properties will move the correct timing around a fair bit. I will probably start with cheeky offers about a year before I think it will trough. If one bites then great.

Henrik

iTrader: (5)

Exactly, stop being such babies


Back on topic. Like I said on page one, I could have bought a run down mid terrace by stretching in 2003, but even back then I knew that interest rates were liable to go up, or something else might come along to cause the price of living in the house to go up. If that would have happened, we would have been royally screwed! I would have had less money available per month due to mortgage, insurances, general maintenance etc etc, I wouldn't have been able to move to take up a better job - why would I have wanted to buy? It doesn't make sense. Also, I was 23 at the time, hardly ready to take on a massive financial commitment, in a foreign country, that ran for longer than I had even lived. Oh and let's be honest, it *is* a massive financial commitment, how many *years* would you have to work purely to pay off a big mortgage?

I could have done what everyone else has been doing for the past couple of years and ignored all the risks of buying, not listened to the alarm bells ringing when looking at house prices etc, but now I'm really happy that I didn't.

Now I'm 28, and luckily I earn a decent chunk and so does my wife. We could buy in our area at less than 3 times our combined salary now, but what if we wanted to have a kid? We'd lose almost 50% of our income, coupled with having a child (massive cost (I know, I know the cost of everything, value of nothing etc)). This would again stretch us a lot financially, especially if we couldn't remortgage at the end of the fixed teaser rate (good bye 5%, hello 7.5%). All this to live in a similar house that I live in already? Pfft!

The house price boom that has been has been driven, in my opinion, by reckless lending principles by the banks and building societies. They should never have allowed more than 4 times salary multiples as mortgages, as it's just not sustainable looking at historical prices. Couple this with reckless borrowing (over inflating your income on a self cert mortgage for example), and you end up with people with lots of someone else's money burning a hole in their pockets, paying ridiculous amounts for houses, not realising that interest rates can go up as well as down (lots of people I've spoken to over the years hold this opinion: "house prices up, interest rates down". When questioned on why they think that, they don't have any good reasoned arguments).

Oh btw, guess who's holding a lot of the collateralised mortgage debt (i.e. debt sold off by the banks to get them off their balance sheets)? Your pension funds, that's who. So, when the chickens come home to roost (i.e. house prices fall, defaults increase etc), not only will an owners house value fall, their pension pot is likely to decrease as well due to their pension funds holding mortgages. Nice little double whammy!


Al4x1: It's not about having the ***** to buy or not. I just didn't see any value in buying a house when everyone was going on about them like as if they were the best investment ever. I don't have the ***** to jump off a high cliff onto sharp rocks either, which is similar to over stretching yourself on a mortgage when the interest rates are at historical lows. Coward indeed.


So, when will I buy? When I can afford to comfortably buy a house with a garage in a neighbourhood I, my wife and kids are not likely to be stabbed to death in when we walk to the shops / school / etc.

If there isn't such a time, then fine, I'll keep renting or move somewhere else. I'm in a different position to most of you on here, I have no "roots" to keep in England. It's a cool place to live and work (I like it very much, thank you), and I genuinely believe I contribute to society in a positive way. However, there's nothing stopping me from moving somewhere else and buying something there (I probably will not go back to Sweden, but Canada IMO seems increasingly attractive).

LozGTI makes a good point about demand. I'd love to buy buckingham palace, but I'm in no position to do so as I don't have the available funds (either through savings or borrowing), so my wish to buy it does not actually add to the demand at all. If it was up for grabs at 1000 pounds, I could buy it, so my demand would be real.


I do a lot of reading on the subject almost daily (underworked IT staff), and to be honest this whole discussion / argument is pointless, as hardly anyone ever changes their mind on the subject. I've stopped discussing it with people I know, as it just ends up in an argument. The only person I've known to change her mind was my wife (around late 2004 early 2005), but then she's a smart cookie


Edit: and to his credit, davegtt seems to have come around as well, at least for first time buyers.

speedking

Inheritance. Parents die. Expensive house converted to cash. Kids have 50% of the value of an expensive house to plough back into the market. A self-inflating balloon.

By renting, not only do you have to save for your retirement, but you have nothing to leave to your kids either. But so long as everyone is putting money aside, then no-one can afford expensive rent, so it is self-regulating to some extent.

Jay m A

iTrader: (2)

Very sound, but when the wife wants a particular property so bad what happens if they don't bite? Walk away to a load of grief or up the offer through gritted teeth?