House prices..

[The Mad Rapper]

I included couples in my example as a combined income.

It depends on how serious the couple are - I mainly go on my peer group and I am the rarity in the group as I am married with three kids (daughter born on Friday )

Even with a larger income (say a combined income of £40k) a lot of first time buyers have personal loans / car loans / credit cards that need paying.

I just think that the house price to income ratio is too big.

I think we will see a fairly dramatic fall up until the summer and then things might start to recover by Q3.

I agree with all of this, except your final sentence. The market will not recover by Q3 2008 - I believe there will be a sharp and significant correction, after which prices will plateau and stagnate for around two years or so.

 

[Bar]

I agree with all of this, except your final sentence. The market will not recover by Q3 2008 - I believe there will be a sharp and significant correction, after which prices will plateau and stagnate for around two years or so.

Have to be honest I am being overly optimistic.

I also believe that the true severity will be in the hands on the media. Does anyone believe we would have seen the run on NR if the media had not reported on it at all?

Far too much of the public are sheep who are easily manipulated by the media.

 

[The Mad Rapper]

Have to be honest I am being overly optimistic.

I also believe that the true severity will be in the hands on the media. Does anyone believe we would have seen the run on NR if the media had not reported on it at all?

Far too much of the public are sheep who are easily manipulated by the media.

The problem with the media is that many of the journalists who write the housing reports etc. are themselves BTL landlords. They therefore have a vested interest in talking the market up! The problem they now have is that they can talk all they like, but if the banks will not lend people the money to buy their homes then prices will fall through the floor!

As another indicator of where we are currently, the banks are now cracking down on mortgage application fraud. They didn't give a **** when prices were rising because they knew they'd always get their money back by selling the home at auction. The FSA have said this morning that they intend to take a far firmer stance on mortgage application fraud next year.

The era of the self-cert mortgage is over for the foreseeable future as well.

 

[Haircut]

I have to say a recovery by Q3 2008 does seem very soon.
I would say we'll see slight year-on-year falls for the next few years before any sort of recovery.

The housing market isn't like the stock market where big gains and losses are seen on short timescales, things take years whether they're going up or down.
I don't have my crystal ball with me so I'm not going to make any predictions as to how much I think they'll fall, suffice it to say I think they will fall to some extent.

 

[Yeggstry]

Its interesting to see your points of view on this guys, as I myself fit neatly into the situation that you are describing - potential FTB, currently renting with my long-term girlfriend in Berkshire. Combined salary of about £45k. Luckily we are sensible with our money, only have a small personal loan and don't spend more than we have with credit cards. Oh, and we haven't got a car at the moment

I remember my parents mentioning how they had next to no disposable income for a couple of years after they first bought a house, and how they had to wait a while to do up the house to how they wanted it. I guess that's why a lot of my friends from school still live in my home town, and a lot (including my brother) with their parents. The comment about younger people spending more money on consumables is right - they do want a better quality of life, but a lot of them don't see a house as part of that.

I didn't realise how lucky I am until I read Bar's post and how he said that the combination of these factors would financially cripple most people - however I personally would rather have the freedom of my own house than to be still living with my parents. The additional financial cost per month to buy would be about £300-400 but the main difference is that I wouldn't be throwing £650 a month down the drain that I am now. Yes I know I need a house etc. but if I can afford to buy then it makes more sense to invest it in my own house rather than someone else's

I was thinking the same thing about waiting until Q3 to look for a house, this uncertainty will remain for at least 6 months in my opinion.

 

[carpmaster]

The additional financial cost per month to buy would be about £300-400 but the main difference is that I wouldn't be throwing £650 a month down the drain that I am now. Yes I know I need a house etc. but if I can afford to buy then it makes more sense to invest it in my own house rather than someone else's

Well if you're based in London somewhere & the house you are renting is (or rather was) valued at around £250,000 then this month alone you'd have saved more than £17,000 by not buying. How many months rent is that? More than 2 years.....

Don't forget everyone that these percentage falls are based on ASKING prices and not actual SOLD prices. The sold prices are going to be LOWER than the asking prices so areas outside London could well have fallen by more than the 6.8% drop in asking prices in London.

 

[Haircut]

Well if you're based in London somewhere & the house you are renting is (or rather was) valued at around £250,000 then this month alone you'd have saved more than £17,000 by not buying. How many months rent is that? More than 2 years.....

Come on, you can't simply take a percentage drop for all of London, apply it to a hypothetical house and then say you've saved £17K by not buying this month.

This is the trouble with averages, they don't tell you anything about individual scenarios.

 

[carpmaster]

Come on, you can't simply take a percentage drop for all of London, apply it to a hypothetical house and then say you've saved £17K by not buying this month.

This is the trouble with averages, they don't tell you anything about individual scenarios.

I think it's a reasonable argument. The fact that the UK wide drop of 3.2% is based on the ASKING prices, means the actual drop is going to be more, especially in areas where the average property price is higher like Berkshire.

A 2 bed house / flat in Berkshire has got to be around the £250,000 mark?

So even at 5% actual fall in sold prices (which I would think is very conservative) he would have saved £12,500 by not buying in the last few months.

 

[Yeggstry]

I'm actually based in Berkshire, and the price of the 1 bed flat we are renting at the moment is probably between 130k and 150k. It is a shoebox though :/

Does anyone else think that the house price average is being skewed by the price of 1 bedroom flats? My gf and I found that about July/August the difference in a large one bedroom flat and a 3 bedroom house in our area was very little (30-40k).

 

[Haircut]

You're still looking at averages though.

What if all the houses that would have been > £1m a few months ago have now been put on the market at 15% discount and £250K houses have gone up?

What if there are more smaller properties this month than last month, thus pushing the average down?

There are lots of reasons why the average is down that don't translate to a £17K fall on a hypothetical house.

 

[Yeggstry]

A 2 bed house / flat in Berkshire has got to be around the £250,000 mark?

For the area I live in (Bracknell) you'd actually get a decent 3 bedroom house for that price. Although without a sizeable deposit (which we may end up getting) we would struggle to pay the mortgage on that back. I get your point though, and we won't be looking at buying for at least 6 months

 

[carpmaster]

All fair points and I agree it's probably not wise to try and apply averages to individual cases due to so many variables.

Good idea holding off & see how bad it gets next year.

 

[carpmaster]

My gf and I found that about July/August the difference in a large one bedroom flat and a 3 bedroom house in our area was very little (30-40k).

That's quite unusual isn't it? Why would anyone buy a one bedroom flat when they could push the boat out for another 30k and have a 3 bedroom house which will probably mean they won't ever need to upsize later on!

 

[5tephen]

I don't know how the BTL'ers were doing it for even the past 6-12 months up to the recent slowdown. Where I'm based, anything that was viewed as a BTL property would have had to have a hell of a deposit thrown down to make any profit on the monthly rent. Whether it was a 1 or 2 bedroom house or some student-y 6-bedroom dive, the price was always a large percentage higher than the income it would bring. At least in the areas I pay attention to, prices would need to go back 2 or 3 years to make BTL investing worthwhile; otherwise people must have just been pulling in the rent to pay a chunk of the mortgage and then relying on the assumption that their house was just going to go up in value forever.

I rent where I'm at at the minute; I enjoy being in Belfast because of proximity to customers and being close to the mates and most importantly the bars. But buying somewhere worthwhile here is just ridiculous. £250k minimum. So instead I bought a BTL house elsewhere, for the sake of something to have, and also that buying something in a location good enough for me was a fair step up in price and at least a couple of years down the line. The house I got about 8-10 months ago was £140k; I put down £35k deposit and I'm still subsidising £150 a month on top of the rental income. I knew this would be the case beforehand anyhow and didn't really mind, it's a pretty small amount of money, but still the fact remains that I'm having to subsidise it.

I don't want to know how many people bought properties far in excess of this value as a BTL. If they lose their tenants it could put their lights out. (a) where I am at least, there's a shocking amount of houses sitting for rent and have been vacant for months, so tenants have a lot more choice and obviously it isn't as easy for landlords to get replacements, and (b) if owners find they can't afford it they can't just sell it off quickly any more.
I don't know how the whole thing didn't cool off a lot earlier.

 

[Helium_Junkie]

So whats the summary, is the average joe going to able to afford a house in 2008?

 

[Dolph]

So whats the summary, is the average joe going to able to afford a house in 2008?

The average Joe can afford a house now, whether they are willing to spend their money that way (and perhaps have to cut down on other things) is a different matter...

 

[The Mad Rapper]

The average Joe can afford a house now, whether they are willing to spend their money that way (and perhaps have to cut down on other things) is a different matter...

The average Joe can afford to buy a house now assuming they don't care where they live.

Whether an average Joe could afford to buy a home in the area they'd like to live is another matter entirely

 

[The Mad Rapper]

That's quite unusual isn't it? Why would anyone buy a one bedroom flat when they could push the boat out for another 30k and have a 3 bedroom house which will probably mean they won't ever need to upsize later on!

Because an additional £30K may not be within their financial capability?

 

[Bar]

Most people can afford a house but what sacrifices do you have to make and are you really getting value for money?

6 years ago I bought a 3 bed semi with my now ex and paid £59,950. Last year she sold the house for £146,995.

Thats a massive increase in such a short space of time. This is not london btw - this is a town between Glasgow and Edinburgh. And the house itself is not in one of the top 5 areas.

The main area for correction is the FTB market. The difference between what you can get for £110k and £200k is astounding.

Just taking my old town as an example:

£110k will buy you a two bed semi/terrace probably ex council. (with the exception of my house which I am trying to sell cheap)

£200k will buy you a 4 bedroom detached in one of the nice areas.

picking a mid point of £150k will get you a three bedroom ex council.

There always seems to be a magic line and in Livingston its about the £180k mark.

Those houses valued at over £180k do not seem to be that much overvalued. All houses below that seem to be the most overinflated and as such should see the biggest correction.

 

[Artemic]

To be honest, And i mean no offence to anyone here when i say this but £900 of disposable income a month is easy to live on.

Presonally i dont earn very much 19k, and my wife gets about 5k from work and after including child allowance etc.. but we have 2 children, a 100k mortgage on a 150k 4 bed house, a car, yeah we dont have sky TV but we have broadband etc.. and we live comforably enough and still manage to save a little here and there all the while paying extra off the mortage each month. We fixed the morgage a year and a half ago, so the payments are not quite what they would be now (about £600). But the idea that £900 is not enough to live on is laughable.

People just want too many luxuries. Please excuse my mini off topic rant

A bit more on topic, Personally if the house prices drop we could be screwed once our fixed rate finishes if the interest rates rise, but i honestly hope they wont rise too much for us to cope with, and if thats the case, we will just have to cut back on some of the little extras that we have. eg, the internet, xbox games etc