House prices..

[Stretch]

Then you should have planned your borrowing strategy more wisely. Four times is ludicrous, let alone five.

But for the average earner, that's how much you need to borrow to buy even a modest property. This is the underlying problem, and with the house price inflation we’ve seen over recent years, you’re damned if you do and damned if you don’t.

We are beginning to see problems develop at the margins of the housing market, and thus house prices are beginning to fall. This will put enough people off buying now (at the margin), and because this and other economic problems of this we will see house prices fall further. People are no longer going to be able to remortgage against equity in their home because they don’t have any. The buy to let market is dead, and many of the people that got on the gravy train are beginning to get cold feet.

If you got on the ladder 2+ years ago I can't see much of a problem in the long term. But for people that brought at the top of the market, I can see a tough few years a head. Undoubtedly we’ll see a number recent first time buyers caught in the negative equity trap, in fact it’s already started in some parts of the country. A house price correction was inevitable, and if doesn’t happen now it’s only a matter of time. The situation at the moment is unascertainable, and I for one am staying well away until the dust has settled.

 

[Stinky]

I'm sure you made all the appropriate calculations, I just think 4,5 times your salary is a silly figure to go for. I know why people do, I just wouldn't myself.

how much would you expect to borrow? i mean you must be on a good £60k a year to not even consider 4times salary

 

[Stinky]

We are beginning to see problems develop at the margins of the housing market, and thus house prices are beginning to fall. This will put enough people off buying now (at the margin), and because this and other economic problems of this we will see house prices fall further. People are no longer going to be able to remortgage against equity in their home because they don’t have any. The buy to let market is dead, and many of the people that got on the gravy train are beginning to get cold feet.

where have you seen that to?? the rentals market at the moment is awesome.

i see where you are coming from, but we still have a lot of people buying around here on BTL. because so many people are looking to rent at the moment, and just see what happens

 

[Bes]

You do realise if there is a crash, it won't be in isolation. If there is still the money and demand to buy, prices won't drop that far before everyone jumps in. The only way there will be significant falls is if people cannot afford to move or buy, that would most likely include you

Oh don't worry about me, I'll still be able to afford to buy- thanks for the advice though

Prices will drop because banks won't want to lend to people on silly multiples and because people coming to the end of teaser rates and cannot afford to remortgage, and be forced into selling. Then factor in that no one wants to buy something for 150K that might be worth 140K next month, and you have plenty of grounds for prices to fall further. Whether a nice measure of a recessionary economy and a large pinch of unemployment will be tossed in to the mix remains to be seen, but house prices can fall quite a way from here regardless.

I can't wait for the papers to start filling up with storys of greedy idiot BTL's who have lost everything in their little empire because they watched some property tosh on Channel 4 and assumed they were the next great property magnates because they had a few new city centre flats on IO mortgages and a crap house somewhere they thought they could "redevelop" for huge profits.

 

[Stretch]

where have you seen that to?? the rentals market at the moment is awesome.

i see where you are coming from, but we still have a lot of people buying around here on BTL. because so many people are looking to rent at the moment, and just see what happens

Manchester and Birmingham

Link

 

[Stinky]

Manchester and Birmingham

is the rental market really that bad?? i struggle to see this, as people now cant get the mortgage they want they are pushed towards renting.

seems strange

 

[Stretch]

is the rental market really that bad?? i struggle to see this, as people now cant get the mortgage they want they are pushed towards renting.

seems strange

That’s one argument, but evidence at the moment seems to suggest otherwise.

 

[Stinky]

That’s one argument, but evidence at the moment seems to suggest otherwise.

i guess that its very different through-out the country

 

[HangTime]

But for the average earner, that's how much you need to borrow to buy even a modest property. This is the underlying problem, and with the house price inflation we’ve seen over recent years, you’re damned if you do and damned if you don’t.

I think this is partly a problem in mentality as much as anything though. People (especially in the average/'lower-middle class' working families such as my own background) have it drummed into them from an early age that the main aspiration in Britain is to own your own home. There comes a point where you have to say "ok, so if that's how much I need to borrow, then I'm not going to do it". I mean, where does it stop? If people are going to pay "whatever it costs", what is to say that 4x is the limit? You can't keep paying more money just because that's what it costs. You seek alternative solutions (accomodation) instead.

You're only damned if you don't if you deem it essential to own a house.

 

[platypus]

how much would you expect to borrow? i mean you must be on a good £60k a year to not even consider 4times salary

Which is why I am not considering buying a house, because I can't afford it.

But for the average earner, that's how much you need to borrow to buy even a modest property. This is the underlying problem, and with the house price inflation we’ve seen over recent years, you’re damned if you do and damned if you don’t.

Then perhaps the problem is the culture of expecting that it is your right to own property.

 

[Stinky]

Which is why I am not considering buying a house, because I can't afford it.

ok, if that was different what in your mind is a reasonable amount to borrow?

 

[platypus]

ok, if that was different what in your mind is a reasonable amount to borrow?

I would never borrow more then 3x.

 

[matt_fsr]

Which is why I am not considering buying a house, because I can't afford it.

Surely that would depend on the cost of renting in your area?

For instance - around here, a sensible mortgage comes in at pretty much identical to rent.

Rent = wasting 5k a year, mortgage = house in 25/30 years time, not a mountain of wasted money.

Mind you - roll on the demise of a few greedy BTL'ers though, get the house prices somewhere like affordable!

 

[HangTime]

how much would you expect to borrow? i mean you must be on a good £60k a year to not even consider 4times salary

Not so; you are making the assumption that you need to borrow huge sums to buy a house. Some people have fairly hefty deposits and thus can buy a house on say 3x combined (modest) income. E.g. say you have a couple, both earning £20k/year, 3x income would be a £120k mortgage. Slap down their 25% deposit of £40k and they've got themselves a £160k home. Obviously in London that wouldn't buy you much, but it would in many areas.

Sure, not everyone has £40k+ deposit, but I'm just highlighting that salary isn't the only factor which dictates the value of the house you can buy.

 

[Stinky]

Not so; you are making the assumption that you need to borrow huge sums to buy a house. Some people have fairly hefty deposits and thus can buy a house on say 3x combined (modest) income. E.g. say you have a couple, both earning £20k/year, 3x income would be a £120k mortgage. Slap down their 25% deposit of £40k and they've got themselves a £160k home. Obviously in London that wouldn't buy you much, but it would in many areas.

Sure, not everyone has £40k+ deposit, but I'm just highlighting that salary isn't the only factor which dictates the value of the house you can buy.

that is true, i would love to have that amount to put down, but with what i currently earn and the area i live, this wouldnt be possible.

i mean the standard 3bed terraced place is £160k at least, yet living in devon the wages are rock bottom, its VERY difficult to get on the property ladder at anytime, expecially now,

however people will say "Move to a area that pays more"
i would do this, but i still couldnt afford to rent a place with no money from here, i simply dont earn enough to save enough to rent. its catch 22

 

[Bes]

Surely that would depend on the cost of renting in your area?

For instance - around here, a sensible mortgage comes in at pretty much identical to rent.

Rent = wasting 5k a year, mortgage = house in 25/30 years time, not a mountain of wasted money.

Mind you - roll on the demise of a few greedy BTL'ers though, get the house prices somewhere like affordable!

RENTING IS NOT A WASTE OF MONEY!!!!!!

If a house is depreciating at a rate of £500 a month (or 0.3% a month on a 150K house) and your rent is £400 a month, you are in fact better off renting... This is before you factor in buildings insurance, repair costs, yadda yadda....

 

[HangTime]

I think (speculation!) the problem in places like Devon/Cornwall is that there is limited opportunity to build more housing, and a fair chunk of the existing property has been swiped for holiday homes and the like. So demand for property is higher than what you would expect the normal equilibrium level to be based on earnings.

 

[Stinky]

RENTING IS NOT A WASTE OF MONEY!!!!!!

If a house is depreciating at a rate of £500 a month (or 0.3% a month on a 150K house) and your rent is £400 a month, you are in fact better off renting... This is before you factor in buildings insurance, repair costs, yadda yadda....

But if you are renting for 5 years vs a mortgage of 5 years are you willing to say that the value of the house is likely to drop £500 a month for 5 years? the rent wont decrease.

you wil have something to show for your money with getting a mortgage compared with renting, even if its not much

 

[Stinky]

I think (speculation!) the problem in places like Devon/Cornwall is that there is limited opportunity to build more housing, and a fair chunk of the existing property has been swiped for holiday homes and the like. So demand for property is higher than what you would expect the normal equilibrium level to be based on earnings.

You have a valid points bloody grockles have ruined a lot of the region for the locals, its is very hard to buy around here now (well for people like me / not earning much) but there are a lot of new developments going up, but they are still expensive. even though they are apparently "Affordable housing"

 

[Bes]

But if you are renting for 5 years vs a mortgage of 5 years are you willing to say that the value of the house is likely to drop £500 a month for 5 years? the rent wont decrease.

you wil have something to show for your money with getting a mortgage compared with renting, even if its not much

Who said anything about renting for 5 years? In the current climate, there is no reason not to rent. If house prices go up, then yes renting becomes secondary to buying.