House prices..

The Mad Rapper said:
Dolph, you must see that tarring everyone with the same brush isn't the answer either?

For all you know there could be professionals employed in the banking industry posting here, yet you choose to dismiss all opinions in this thread as worthless because they were posted on OCUK?
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It's not because they are posted on OcUK at all. It's based on evaluation of previous claims and posts by said posters, how their previous predictions have come across and so on. Some of the people claiming prices are going to crash massively have been making the same claim for years, which seriously damages their credibility. Suggestions made by those same people that would deliberately invoke a recession also suggest flaws in their stances.

There are some banking professionals on here that I know of, but afaik, none of them are among the perpetual doomongers for the housing market, which would further suggest that putting faith in the doomongers point of view is not a good plan.

Further to that, the main defence against my arguments seems to be misrepresentation (see the post about me advocating continued rises, I've never done any such thing, I've suggested stagnation or a slight drop, but that the chances of a full on crash are low).
 
nucastle said:
He's right .... prices will keep on rising and will not crash.

In about 10-20 years time of consistant 5-10% price rises, a flat in london will cost 500k and a house will go for 1 million to 1.5 million as a starting figure.

Kids will need to borrow 10 times their salary and their mortgage payments will eat up about 99% to 199% of their monthly salaries.

The only way to get around this will be 50 year mortgages, and generational ones where you will be forced into having 2 children - not because you want them, but because you basically need someone to carry on the mortgage.


..... Of course, some people argue that economic cycles are called that because they are by their very nature ... Cyclical? ;)
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Now go back and read my posts before making up random positions that have nothing to do with mine as if they defend yours.
 
Butters said:
Lol, looking at this thread even 3 months after it was started makes me laugh the number of people who are like "omg, house prices falling, where do you live, sucker".
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There were threads just like these made a couple of years back. Nothing has changed, house prices have either risen or held their value, year on year.

The people on this board (and those on housepricecrash), make out as if they are economic geniuses, yet, they keep making incorrect predictions, with regards to house prices. Not only that, but they insist that they are on the verge of being right. Meanwhile, years roll by, with no sign of a crash.

Given that these doom mongers have been wrong every time, I can't take them seriously anymore.
 
Butters said:
However, in the long run, as it always does, housing investments will outperform any other type of investment over its period.
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Actually, there was an article on Motley Fool. It compared the FTSE100 with average house prices, over a long period of time. Investing in the FTSE100 was marginally more profitable than property.
 
fundamentally what nucastle said is true. There will be a day where the average house price will be £1 million.

Its only a multiple of 5 from the average house price now.

My grandparents bought houses for £5k. There worth £300k now. Do the math.

Thats why its best to buy sooner rather than later. My grandad said you always needed to buy more than 1, because the first one is your home and you'll never realise the financial benefit from that singluar (unless you sell and rented in your later years). However in the later years when you sell your 2nd or 3rd house thats when you really benefit.
 
sunama said:
Actually, there was an article on Motley Fool. It compared the FTSE100 with average house prices, over a long period of time. Investing in the FTSE100 was marginally more profitable than property.
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Yes, but remember a mortgage is geared. So you cant really hit the same scale returns on a FTSE.
 
pallys said:
fundamentally what nucastle said is true. There will be a day where the average house price will be £1 million.

Its only a multiple of 5 from the average house price now.

My grandparents bought houses for £5k. There worth £300k now. Do the math.

Thats why its best to buy sooner rather than later. My grandad said you always needed to buy more than 1, because the first one is your home and you'll never realise the financial benefit from that singluar (unless you sell and rented in your later years). However in the later years when you sell your 2nd or 3rd house thats when you really benefit.
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I don't think anyone disputes that long term houses will rise in value, if you hold onto just about anything long enough it will be worth several times what you paid for it.

Its simply a matter of timing and right now is a bad time to buy imo.
 
mattx2 said:
Its simply a matter of timing and right now is a bad time to buy imo.
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A lot of people seem to be saying that in this thread. A lot of people were saying that last year, the year before that and the year before that. If people had followed that advice for all those years and decided to rent and hold off buying, then by now, they would be worse off.

I do agree that at some stage some form of correction must happen, but it could happen in a way such that there is no severe correction; just a gradual decline or even stagnation, allowing wages to catch up before HPI takes off again. A soft landing is quite possible and that is what the Government are going to aim for.
 
sunama said:
A lot of people seem to be saying that in this thread. A lot of people were saying that last year, the year before that and the year before that. If people had followed that advice for all those years and decided to rent and hold off buying, then by now, they would be worse off.

I do agree that at some stage some form of correction must happen, but it could happen in a way such that there is no severe correction; just a gradual decline or even stagnation, allowing wages to catch up before HPI takes off again. A soft landing is quite possible and that is what the Government are going to aim for.
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If I had the money to buy 2-3 years ago I would have, I'm not HPI crash frantic but I have been bearish on house prices for the last 12 months. Its too early to tell how far house prices will drop but it largely depends on the credit supply and as the sale of mbs's has all but ceased the banks can't sell on the debit to allow them to take on more loans, hence they will up the credit quality requried which means higher deposits less multiple.

A soft landing is possible it depends on your definition of soft, but the last few years of HPI at 10%+ are gone, so if you have 10k knocking around theres much better places to stick it than using it as a deposit buying a house as an investment
 
Third Opinion said:
Oh dear, this is not good news for First time buyers.

http://business.timesonline.co.uk/tol/business/money/property_and_mortgages/article3174804.ece
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This really only affects the foolish though and I have no pity for them.
Anyone who can afford their mortgage payments and isn't planning on moving in the near future should be fine, even with negative equity.
If you pushed yourself to the limit then you should realise it's a gamble that may not always pay off.
 
Haircut said:
This really only affects the foolish though and I have no pity for them.
Anyone who can afford their mortgage payments and isn't planning on moving in the near future should be fine, even with negative equity.
If you pushed yourself to the limit then you should realise it's a gamble that may not always pay off.
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I agree to a point but remember most of the people who have bought these new build rabbit hutches have been constantly fed a diet of media hype / property programmes / investment adverts etc which has made them believe they must get on the ladder by whatever means because otherwise it will be too late.

In making the decision to stretch themselves to the limit to buy, I doubt they will have even remotely considered the prospect that the value of their "investment" might fall.

I'd say it's partly their fault for being naive and not doing their own research, but it's also the fault of the people / agencies / media who incessantly ramp the property market and don't give any mention of how things could go wrong.
 
carpmaster said:
it's also the fault of the people / agencies / media who incessantly ramp the property market and don't give any mention of how things could go wrong.
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I disagree, for a few years now everywhere I look there has been tales of potential doom and gloom, and you can't even read up on a mortgage these days without getting stuff like

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

shoved in your face. Quotes typically have projections of what would have if interest rates rise too.

Admittedly shows like Property Ladder and Relocation, Relocation do give the impression that prices will soar through the roof regardless of what you do, but I tend to read/hear much more about potential problems with the housing market than I did when I was a child (edit: apart from during the crash, obviously!)
 
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Third Opinion said:
Oh dear, this is not good news for First time buyers.

http://business.timesonline.co.uk/tol/business/money/property_and_mortgages/article3174804.ece
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The thing is, I don't see why First Time Buyers are being specifically 'targetted' by that article, other than just throwing in another buzz word.

Surely ANYONE who has bought a home via mortgage during the peak of the market is at risk of negative equity if there is a substantial fall, not just FTBs. There is this assumption that all FTBs will have a high LTV but that isn't necessarily the case.

I suppose you could argue that people who were already on the ladder will likely have a larger deposit (and thus less risk of negative equity) simply because their previous home will presumably have risen in value fast over the preceeding years and thus will exceed their mortgage debt by a significant amount. But this may not be the case for everyone.
 
HangTime said:
Surely ANYONE who has bought a home via mortgage during the peak of the market is at risk of negative equity if there is a substantial fall, not just FTBs. There is this assumption that all FTBs will have a high LTV but that isn't necessarily the case.
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I can't produce any evidence of this, but my opinion is that most FTBs will have a far higher LTV than existing homeowners. Why? Because anyone who has bought in the last ten years ought to have benefited from the HPI. They should therefore have far more of a deposit for a new property when they realise the equity from their old home.

I suppose you could argue that people who were already on the ladder will likely have a larger deposit (and thus less risk of negative equity) simply because their previous home will presumably have risen in value fast over the preceeding years and thus will exceed their mortgage debt by a significant amount. But this may not be the case for everyone.
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Aah, you recognised my counter-argument yourself. Nice one ;)

You're right, it won't be the case for everyone, but exceptions aside, it will be the case for most people.
 
Thing is it depends what these, hmm, need to coin a term for it, "Home Owning Veterans" (HOVs) did with their old home. Some may have remortgaged and added to their existing loan, using their appreciating house as a wallet if you like.

Then you need to remember that the typical value of a First home is significantly lower than the average (I have seen stats to back this up). Which is turn means that if a crash happens, those homes are likely to depreciate by less (in monetary, not relative terms) than the typical pad of a HOV. So, even if negative equity hits, it isn't likely to be very large. Consider the following situation:

FTB buys a flat for £100k, 90% LTV
HOV buys a house for £200k, 90% LTV. He has been able to get a greater deposit than the FTB (as we discussed above), but he's used that to get a nicer place.

Market crashes by 20% (for the purpose of this I'm assuming overnight crash, obviously it won't be so knock off a bit for repayments if you like). Also assume it affects all properties equally.

FTB now has a house worth £80k and a debt of £90k, negative equity of £10k
HOV now has a house worth £160k and debt of £180k, negative equity of £20k

So even though the FTB has a smaller initial desposit, his negative equity isn't so large as the HOV, simply because he typically has a cheaper home to start with and thus a lesser reduction in value.

Now, I'm not trying to say that FTBs won't be in trouble from any crash, and my example probably isn't indicative of the market as a whole. But there does seem to be a big thing in the media these days to try and paint a picture of doom and gloom for them specifically rather than home buyers in general.
 
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So if inflation is ABOVE target, why would the BOE cut rates?

They have to justify their changes in interest rates with inflation preditions to back these up remember. They cant just cut for the sake of giving joe bloggs a hand with his mortgage.



(Obviously a lot of us including me believe that the BOE isnt the slightest bit independant - but the funny thing is just what reasoning the BOE use when they tweak interest rates without any concrete reasoning).
 
House price fall 'at 1990s rates'
http://newsvote.bbc.co.uk/1/hi/business/7191012.stm

Property prices are falling at rates not seen since the 1990s housing recession, a surveyors body has warned.

The Royal Institution of Chartered Surveyors (Rics) said 49.1% more surveyors saw price falls in December than reported a rise.

This was the gloomiest figure since November 1992.

...

December marked the fifth consecutive month of falling prices, according to the Rics survey.
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