House Prices - Where does it end?

brid said:
Just look at the USA ..... currently at the start of a house price crash.
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I'm not sure it will crash. It has been slow for quite some time, and although repossessions are up due to the bottom dropping out of the sub-prime market, prices haven't really dropped much.

Again, location is a big factor. The situation changes with state. Houses in CA are becoming as pricey as the UK and are RISING in value, so a general statement is harder to make for the whole country.
 
brid said:
Im not going to turn this into a trolling match any more - but my feeling is that if you cant afford to buy a house with a proper mortgage, then basically borrowing money to gamble (investment is a gamble remember) for me PERSONALLY is something i just would not do. Its essentially just the same as borrowing money to put on the stock market, gold, commodities, or the horses.
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I was told by many that a 100% mortgage was a daft idea when I bought my house 6 years ago and it all worked out fine. And you keep going on about investment, what people are talking about is buying a house to live in not for investment.
 
its all down to the level of employment, people will pay anything for anything as long as they have the money. When the dont have the money (to pay back the interest) the whole pack of cards comes tumbling down.

Now what causes unemployment to rise is really in the lap of the gods and political parties, although the tories used to think unemployment made industry more competitive and labour may tax it too much to make it uncompetitive. Either way you could lose big time, you dont buy .. house prices carry on going up, you do buy, prices crash. *** a laarff
 
Its been interesting reading this thread. I am in the lucky/unlucky position of having an interest only BTL mortgage and a repayment mortgage on two seperate properties. I do not think that pricing is going to dip in anywhere worth buying this year.

Seen some interesting opinions and want to add a bit of my current experience to the thread.

I do not make a profit on the BTL house, it pays for its upkeep. I price it comptetively so its always full, and I am lucky enough for the house to be in an area with good schools and easy distance for the M1/A1 and M621. Its a great house for long term tenants which are usually families. The house is ran by a letting agent and as such is fully within all legal requirments. The house has a electrical and gas certificatation and complies with building regulations throughout.

I have the misfortune to have a non paying tenant at the moment, as such I am paying two mortgages from my own wages. I am in court soon evicting them. The money they owe me is dead and gone, but on the good side I have 15 interested people waiting to view as soon as the non paying tenant is out.
Location is a factor, certainly rent cost too. Its still an investment, its trippled in price since I bought the house. I change mortgage lenders every 2 years to get the best possible deal with interest and 'stepped discounted' rates. I am currently paying just less than £400pcm on a £100k mortgage.

I didnt buy this house with the intention of going BTL, it just kind of happened. When my work moved i remortgaged to BTL, grabbed some equity and placed £20k on the house with a repayment mortgage. This is the house I live in now.

The BTL house is currently not giving me any profit, but its market value is improving. The house is also improving as I spend the rental income on improving it. Its had new central heating, bathroom and Kitchen improvments and windows. Its had all its wiring updated and the garden has had time spent on it.

As mentioned before in this thread, now is not the time for a BTL. The rental income will not match the mortgage repayment required unless in a desperatley wanted area. I am debating selling this house and paying a chunk off my repayment home after all taxes etc, not because I am worried of a crash, but purely as dont need the additional financial pressure or worry of the BTL.

My advice for anyone going BTL, is too try and keep it full, not be too greedy, pick a good spot and only do it if you can afford to keep it going with no tenants.

Hope i have added some content to this thread ;)
 
Its a bubble plain and simple. I'm just old enough to remember the dot com boom days and how tech stocks would rise and rise. Looking back you would have to have been a fool to invest in them as the sums didn't add up earning per share was to low etc.

Its the same with house prices now people just seem to think that house prices will go up 10% every year. So that would mean in the next 10 years the average house will be worth £500k and the average person will be earining maybe 30Kish.

Maybe house prices won't crash but the sustained capital appreciation of 10% per year which some investers count on won't be there for much longer which will put there btl yields lower than that of the base rate.
 
Just to clarify:

Average house price= 180k or so
Rate of housing inflation= 9-10%

Assuming 9%
predicted House price in 10 years at current rate=426k

Average uk wage=25k
Rate of wage inflation= 3-4%
Assuming 4%
predicted average wage in 10 years at current rate= 37k

so thats a price to earnings ratio of 7.2 to 1 now and 11.5 to 1 in ten years.


The only thing that people cannot seem to fathom is that the current rate of growth in not sustainable. So the fact is, it will change at some stage, anybody who believes otherwise is foolish. How it will change is open to debate, but 7.2 is already well above any kind of historical norm.
 
SpeedFreak said:
The only thing that people cannot seem to fathom is that the current rate of growth in not sustainable. So the fact is, it will change at some stage, anybody who believes otherwise is foolish. How it will change is open to debate, but 7.2 is already well above any kind of historical norm.
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There are other factors which are also well above any kind of historical norm though, which are also driving prices upwards. Namely the large number of people who choose to live alone nowadays compared to in the past. And the record level of immigration we are experiencing.
 
dirtydog said:
There are other factors which are also well above any kind of historical norm though, which are also driving prices upwards. Namely the large number of people who choose to live alone nowadays compared to in the past. And the record level of immigration we are experiencing.
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I'm not denying that at all and as you are aware, it is a complex problem which cannot be completely simplified. However the key is affordability. The only way growth will slow is if interest rates rise. With property prices so high, enough people will have overstretched themselves to a point where 0.5% rises are too much for them to afford.

As I have always believed, it is those who created the problem that will walk away largely unscathed, leaving those who just want to own their own home to piece back together their lives.
 
Bes said:
A long period of low interest rates not seen before and low unemployment is fuelling huge increases in house prices. Once one of those things starts to slide, the maket will begin to cool rapidly. House prices are driven by sentiment, and whilst it remains good and BTL remains 'fashionable', house prices will continue to rise.

True there is supply and demand, but demand only remains because banks are still willing to dish out mortgages on ridiculous multiples and lend people the £200K for their one bedroom flat in some corner of the UK. Conditions will not remain so favourable to buyers forever, and the enormous amount of credit & cash sloshing around at the moment will not be there when banks and building societies tighen their lending crieteria.
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There has been a rapid slowdown in cambridge where I live on lots of property sizes. 4 Bedroom houses just aren't moving any longer. I see houses on the market for getting on for a year. Just swapping agents. The agents got greedy promising £££££'s that the market can no longer sustain due to the loss of the first time buyer and people not being able to get on the ladder.

I don't think we are far off seeing a dip in prices around various areas that will lead to a lack of confidence in the market. Of course they wont go back down to 95 prices but I do believe one is inevitable.

The thing that gets up my nose is affordable housing. A good friend of mine lives in the northeast where quite a few developements are going up. He earns around 35-40k per year. He has his own morgaged 4 bedhouse. He's snapping up affordable housing, 2 bed apartments for around 105k. He then rents them out. He has now been cleared for upto 2 million on buy to let.

That shouldn't be allowed to happen. Affordable housing should be to help people get on the ladder not make a load of money for people on buy to let.

Where he bought his 5 apartments, every one of the block was bought by 'investors' from plan. Not one went to someone trying to get on the ladder.

Purely my opinion but thats just helping no one.
 
I agree totally, my mother in law is the same. However in fairness she only has about 60k of a mortgage on over 1 million pounds worth of property.
 
SpeedFreak said:
I agree totally, my mother in law is the same. However in fairness she only has about 60k of a mortgage on over 1 million pounds worth of property.
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I dont have a problem with people building a portfolio of properties to rent. Only when its the affordable stuff, that was designed to help out first time buyers.

How old's the mother in law? Bet there's smoke coming from your palms from rubbing your hands together ;)
 
mattx2 said:
Its a bubble plain and simple. I'm just old enough to remember the dot com boom days and how tech stocks would rise and rise. Looking back you would have to have been a fool to invest in them as the sums didn't add up earning per share was to low etc.

Its the same with house prices now people just seem to think that house prices will go up 10% every year. So that would mean in the next 10 years the average house will be worth £500k and the average person will be earining maybe 30Kish.

Maybe house prices won't crash but the sustained capital appreciation of 10% per year which some investers count on won't be there for much longer which will put there btl yields lower than that of the base rate.
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The difference is that the dotcom bubble only really lasted 2-3 years whereas the housing market has been growing very quickly for much longer. I don't doubt that the current growth is unsustainable, but I doubt a full blown crash is on the cards, a slow down and small correction is more likely imo.
 
and you plan on staying there a while
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I understand what your saying but personally I can envisage moving around a lot. Ultimately a family of 4 children is something myself and my wife are aiming for. Couple that with a mobile job and I'm quite hesitant.
 
House prices don't raise by themselves, blame greedy estate agents trying to squeeze as much commission as they can.
I reckon they are public enemy number one & it needs sorting out soon with a flat fee & not a % of the sale price
 
They should charge people who buy up all the houses/flats much more duty for their "portfolios". Although if there wasn't such an influx of foreigners wanting to rent, that would help.
 
Property developers like 'Barrett' target buy to letters when they advertise property. They built a lot of apartments in Melton Mowbray near my Mum's village and had a consultant there who advised on buy to let.
 
Short term an interest only mortgage + overpayments can work out better than a full blown capital repayment mortgage.

This debate will be had every few months, it has been for the last few years with everyone waiting for the crash. I personally don't see prices crashing down, it'll simmer down but I don't see this amazing crash coming anytime soon.

And for the people who do think a crash is coming, when will this be, 6 months, 12 months?

Usher said:
House prices don't raise by themselves, blame greedy estate agents trying to squeeze as much commission as they can.
I reckon they are public enemy number one & it needs sorting out soon with a flat fee & not a % of the sale price
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Interesting, say an agent is on 1.5% commission. If there's a house for sale on at 200k, do you think the agent is going to break his balls to get someone to buy it at 215k? That's an increase of just 225 quid in commission he'll get, considering that's on top of 3k that's not a lot. Is he going to risk losing the sale, and his 3k, for £225?

Agents aren't greedy (well not the decent ones, yes there are some about!), vendors are :)
 
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Ev0 said:
Interesting, say an agent is on 1.5% commission. If there's a house for sale on at 200k, do you think the agent is going to break his balls to get someone to buy it at 215k? That's an increase of just 225 quid in commission he'll get, considering that's on top of 3k that's not a lot. Is he going to risk losing the sale, and his 3k, for £225?

Agents aren't greedy (well not the decent ones, yes there are some about!), vendors are :)
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I think it's not just the percentage it's the fact they are telling people they can get them more than the other agents to secure the vendor. The competition to get properties they claim to be able to get more than than they actually think. When I went to sell my last property all the smaller agents told me between 25 and 40k up from the main agent in the area who turns over more properties.

I hate the lot of them.
 
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