Do nothing ! -- Makes you think

Mr_Proctalgia

Sooooooooo.... All these renters are sitting around waiting for house prices to fall to levels they feel comfortable with? All those house owners are sitting around thinking " I'm not selling in this market I will wait a bit"

That leaves the current stuff on the market and a small number of "Forced Sales". The evidence is empirical as to the number of renters and the no. of properties for sale therefore I can see a situation where the FTB'ers will be chasing their own market sector up in price!

You might be happily waiting for No2 Acacia Ave to fall from £140k to say £100k, at which price you would be happy to buy, however, unknown to you FTB No2 round the corner is happy to buy at £110K so you lose out on this one. You go looking for another property and the same thing happens again, so you have to raise your game a little, this causes house price inflation.

Which ever way you look at it there is a shortage of houses in certain price bands, the market always has been a little skewed. I think this is because once you cease to be a renter and become an owner you have a vested interest in house prices rising and won't sell in a falling market if you do not have to.

GDB2222

FaTB wrote:

I wouldn't bet on that, I think IR's will definately be on the way UP next year, due to inflationary pressures.

Could be. I said that the interest rate outlook looks better than 1988, which I think you may agree with, given that rates reached 15% in 1990 for a short time. People just ran out of money to pay the mortgage interest. On a multiple of 3 times, 15% meant an interest bill of 45% of gross pay, to be met out of earnings that had had tax and NI knocked off. That left virtually nothing over for day to day expenses. For those people with mortgages of more than 3 times, the interest bill could have exceeded net earnings. People managed in many cases, until somethng happened unexpectedly - death, divorce, splitting up, or redundancy. There were a lot of repossessions. These were sold on the market as 'forced sales' and depressed prices further.

By comparison, interest rates are lower now, but mortgage multiples are higher. I suppose that interest rates would have to rise to 7-8% to make the same level of unaffordability.

meanmachine_2

GDB2222 wrote:

By comparison, interest rates are lower now, but mortgage multiples are higher. I suppose that interest rates would have to rise to 7-8% to make the same level of unaffordability.

Surely we've JUST seen that 4.75% is the absolute maximum that the economy can bear before everything shrivels up?!

and even at 4.5% the high street struggles.

Lord knows what would happen if we went up to 8%. But many recent buyers I know would simply go under.

chinagirl

We bought a house in the late '80s, £50,000, high interest rate. After selling and renting for a number of years we have recently bought a house again, £100,000, low interest rates, and Guess What? Our mortgage payments are nigh-on the same as we were paying monthly in the '80s.

Unless your a property tycoon, forget about making a killing from your house, just live in it and enjoy your life to the full.

tcall

All these people saying "don't buy don't buy", seem to forget that the alternative is to pour money down the drain renting. I'd rather buy now and live in my own property and see it reduce in value by 7 grand a year, than rent someone else's property and shell out 7 grand a year for the privilege.

wolvoman

tcall wrote:

All these people saying "don't buy don't buy", seem to forget that the alternative is to pour money down the drain renting. I'd rather buy now and live in my own property and see it reduce in value by 7 grand a year, than rent someone else's property and shell out 7 grand a year for the privilege.

So 7 grand a year in rent versus buying a house losing 7 grand a year. Then there is a mortgage to pay. Even an interest only mortgage will be about the same as rent so another 7 grand a year.

So you'd rather pay £14K per year to buy a place you could rent for half that amount......?

westernpromise

tcall wrote:

All these people saying "don't buy don't buy", seem to forget that the alternative is to pour money down the drain renting. I'd rather buy now and live in my own property and see it reduce in value by 7 grand a year, than rent someone else's property and shell out 7 grand a year for the privilege.

There is no difference between renting and buying in the sense you suggest. If you buy a house using a mortgage, you are simply renting the money with which you buy the house, rather than renting the house itself. You either pay the lender rent on the money at 5%, or you pay the landlord rent on the house, also at about 5% at the present time. They are exactly the same in their cost and economic effect - except that the house-renter foregoes the possibility of capital gains in exchange for guaranteed non-exposure to the possibility of capital falls.

There have of course been occasions in the past when renting the house was costly compared to renting the money. If rental yields were 10% and interest rates were 5%, then renting the money is cheaper. That said, most of the time when this has been true, it was because we had recently experienced a price crash. In the mid-90s it made perfect sense to pay 10% rent instead of 5% interest, because as a renter, you were paying to avoid exposure to further price falls like those of the previous 7 years.

This created a benign BTL market which was fuelled at least in part by naive people who had no understanding or recollection of recent economic history. I can remember reading in the paper about 20-something BTLers who solemnly stated that house prices never went down, did they. This was just 2 or 3 years after a really gruesome crash, during which many such BTLers were presumably still at secondary school. They then proceeded to load up with as many BTL mortgages as they could in the expectation that the rents will always exceed the income.

westernpromise

wolvoman wrote:

So 7 grand a year in rent versus buying a house losing 7 grand a year. Then there is a mortgage to pay. Even an interest only mortgage will be about the same as rent so another 7 grand a year.

So you'd rather pay £14K per year to buy a place you could rent for half that amount......?

There are indeed lots of people out there who are that financially illiterate, and more.

It is astonishing how often you meet people who think that renting is "money down the drain" - exactly as though you could buy somewhere on a repayment mortgage for no more per month than you could rent it.

For a couple of years in the mid-90s that was possible but the market has now corrected this.

If it's still possible anywhere in the southeast I'd like to know where.

nelly_2

That thanks wasnt for what you said its for the avatar piccy

Theres just something about the Hasselhoofmeister that makes ma laugh

westernpromise

nelly wrote:

That thanks wasnt for what you said its for the avatar piccy

Theres just something about the Hasselhoofmeister that makes ma laugh

You don't understand. That really is me. Actual size innit?