Soldato
40-50% drops?
I doubt even the most pessimistic people out there would go that far.
I doubt even the most pessimistic people out there would go that far.
House prices
- Thread starter dal
- Start date
Thank you kindly.
I can also understand where you are coming from with your rebalancing numbers but I just cannot see people selling a house that was 300k 2 years ago for 150k or less in a few years time.
Most people aren't going to be able to take that kind of hit on the mortgage (partly becuase they probably re mortgaged at the height to buy an X5 and a holiday to Florida) and also get another mortgage for somewhere else. As a result they'll have no choice but to either rent the property out or stay where they are which won't be a problem as long as they can still afford the mortgage.
The problem we have then is that if price do indeed drop 40% that then puts a massive amount of people into negative equity, the amount of houses on the market is going to tighten right up as a lot of people will be nigh on unable to sell even if they want to. With no supply and a lot of demand more will rent out and be forced to rent keeping rent price high.
Rent prices as far as I can see fell when the house prices dropped off a cliff but are now back at and above 2007 peak levels using data from this site.
http://www.rentright.co.uk/00_00_00_2_00_rrpi.aspx
With the slightly tighter restrictions on mortgages (IE you now need a deposit) there are a whole bunch of folk who want to buy and could afford the 2007 mortgage prices, they are just currently shut out because they don't have the deposit. As time goes on over the next 18 months more and more people are going to have had the time they need to save that deposit (my brother is one example) and will be in the market for a place and will have money to spend.
its really going to be interesting to see how it all unfolds. its just sad that some good and honest people that did nothing wrong could end up losing their homes because of it.
Permabanned
I have been very pleased to see house prices drop significantly over the last couple of years and hope it continues into this year ready for my first house.
Where abouts are you? Prices down here have gone up in the last couple of years if anything. Has the bottom fallen out of the job market in your area or something?
Soldato
I have been very pleased to see house prices drop significantly over the last couple of years and hope it continues into this year ready for my first house.
I have been very displeased to see house prices drop significantly over the last couple of years and hope it does not continue into this year ready for possibly moving.
See what i did there
If they DO drop too much, I predict a drop in housing availability for purchase as people who may have been selling to move/upgrade sit tight until they can afford it. Yes, the price of the house they were looking at MAY have dropped as well but that won't help much if their current house took a big drop and they can no longer afford a hefty deposit themselves.
it doesn't really matter how much houses prices are.
Low value - low mortgage availability and more risk for banks so higher rates.
High value - more mortgage availability and less risk to bank so smaller rates
At the end of the day on average it is always hard to get on the property ladder and there has been a fair few articles explaining why you are no better of with lower house values.
As long as you buy it as somewhere to live and can either afford rates to go up or fix the mortgage then buy when you can/find something you like.
Low value - low mortgage availability and more risk for banks so higher rates.
High value - more mortgage availability and less risk to bank so smaller rates
At the end of the day on average it is always hard to get on the property ladder and there has been a fair few articles explaining why you are no better of with lower house values.
As long as you buy it as somewhere to live and can either afford rates to go up or fix the mortgage then buy when you can/find something you like.
Soldato
Got a link to one of those?
The way I see it that lower house values generally result from higher interest rates, which result from higher inflation.
So, at the point of buying your house you may be paying the same amount as in a high house price/low interest rate/low inflation scenario, but the inflation over time erodes the debt so the mortgage payments become more manageable more quickly.
That just deals with the actual part of buying a house though.
I was talking about what happens after that.
Compare the scenarios:
1) Take out a £160K mortgage at 4% in a low inflation, high house price environment.
Initial mortgage payment is £844 per month and you receive annual pay rises of 3%.
1) Take out a £80K mortgage at 12% in a high inflation, low house price environment.
Initial mortgage payment is £842 per month and you receive annual pay rises of 10%.
Even though the mortgages are equivalent at the start, the person in the first scenario remains hampered by the debt for a longer period than the one in the second scenario.
The second scenario is what we've seen in the past, the first scenario is what we have at the minute.
If it remains like this long term I can see significant problems for the economy for years to come. People will be spending much more of their incomes on mortgage repayments for longer periods leaving them with less disposable income and less to plough into the economy.
Rates aren't high though they are low, and with a decent deposit (i.e. prudence) even lower.