RICS-Jan: Prices falling in less than half the country, 3rd month of improvement

HAMISH_MCTAVISH wrote: »

Prices now falling in less than half the country, stable or rising in the rest.

I've just had an offer accepted on a property, so I hope that's reasonably strong proof that I'm not a 'end is nigh' property bear. Even having just bought, I don't think the Rics data does much to prove the housing market is getting stronger.

I still expect house prices to decrease by another 4-7% in real terms this year. I certainly don't expect to see prices increase in nominal terms.

In addition, I don't see why (I or other owners) would want it to. I will undoubtedly want to buy a more expensive house in the future. Decreasing prices will make that easier for me to step up 'the ladder'.

I think that's true of a lot of people DervProf, although I see a lot of people taking interest in house price movements who have no vested interest beyond their current home. Perhaps it's just interesting to them and there's nothing more to it.

ruggy83 wrote: »

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Well, depending on your mortgage balance, if prices drop, you may not be able to move to a bigger home because you have no equity in the house you are trying to sell.

I bought my flat 3 years ago, and have seen £15k sahved off the selling price. I need the market to pick up in order to get some of that money back, before i have enough equity to buy somewhere bigger.

but if the market picks up then so will the bigger place so as much as you CAN move, it WILL cost you more! Less cash flow in the short term, more in the long term.

ruggy83 wrote: »

I bought my flat 3 years ago, and have seen £15k sahved off the selling price. I need the market to pick up in order to get some of that money back, before i have enough equity to buy somewhere bigger.

That is sadly the case for a number of people who bought right at the peak. I don't think you, or others like you, did anythng wrong. Very few people predicted the market accurately. You didn't deserve to lose out, anymore than people who bought in ~2000 deserved to gain so much.

All that said, I'm afraid that's the way of the British property market. It is the excessive value of property that allowed prices to fall so far, and for such large mortgages to be required. If house prices remained stagnant for five-years to a decade it would make house affordable (at normal interest rates), and most current owners would be ok.

IveSeenTheLight wrote: »

Ruggy83's point stands though.

If you put down a 10% deposit on a £100k property you have £10k equity on a 90% LTV

If prices stay the same and you want to upgrade to a £200k property, you need to find an additional £10k, deposit just to meet a 90% LTV product.

If prices lowered 20%, you'd be in NE to the tune of £10k.
So to buy the property now valued at £160k (£200k -20%) you'd need to find the additional £10k NE + £16k (£26k) deposit for the 90% LTV

If prices rose by 20%, you'd have £30k equity (£10k initial deposit + £20k increase in property value.

That £30k would allow you to put down a 12.5% deposit on the £240k property.

Putting it simply in this scenario: -
Prices remain the same = Additional £10k deposit required
Prices drop 20% = Additional £26k deposit required.
Prices rise 20% = No additional deposit required.

If credit is available then it's easier to upsize in a rising market than a falling one.

Sure you'd be paying more for the property in a rising market, but that is something you can calculate if you can afford or not in your options.
In a falling or stagnant market, you may not have that option at all.

The problem with your assumption is your assuming the guys earning power has increased or his (at least disposable income has increased), if prices fall 10% wages stay same... equity eroded, but ability to buy cheaper bigger house is better if you have cash on your side. Wages have technically stagnated, so for the now 200k house, which might be 180k, technically not even 100% increase in earnings are required.

20% increase, the 240k house, now needs a mortgage of 210k... compared to the original 90k... so earnings would on a like 4 like basis need to have rose by 133% in 3 years? during these times of austerity?? LOL

If he brought 3 years ago, chances are 100% mortgage was used.

If he has doubled his earning power to buy a bigger place, then with his little outgoings he can save hard, to put money down. If he can't then can he really afford technically, a double mortgage compared to now?

The problem with your analysis is it goes on about deposit, and not a lot else.

The deposit is not really reducing the banks risk, its just showing how responsible a person you are really.

If you CANT save... what chances do you have of paying for a mortgage that is double living costs that are double... (bigger place, for kids, oh, theres some extra outgoings) food bills, double energy bills, nursery costs, bigger cars, more expensive holidays, etc, etc.