Do You Expect House Prices To Increase In Over The Course Of The Next 12 Months?

superscotsman

Kenny4315 wrote:

Speculation about price rises have pushed up prices by several ways :

3. Many individuals have speculated on price rises, while ignoring the fact that although there house has gone up by X the other have gone up also. My house is worth £Xk mentality and I got it for £X- £Y. So i'll blow the additional cash of cars, holidays, etc, as I expect this to be a continual trend, result massive national debt.

Sorry to appear to be disagreeing with you, because there is not a lot on your posting that I would disagree with. But when you say, well the other house has gone up, too, so you don't make any money, this is correct, but it does not give the whole picture. Loads of people make money in rising markets. I'll show you how they do it.

During the 1970s I was living in Blackpool, and I met quite a few people who had retired to Lytham St Annes with loadsamoney. I would meet them and they were quite free with their advice. "D'you Know 'ow I did it, lad?" Many of them were continually taking out the biggest mortgage they could andbuying the biggest house they could. Sometimes they would even buy hotels and do bed and breakfast on the side. Then, when they had had their fill. They would sell up, and move into a smaller house. Well, it need not be a smaller house. When we did it, we moved into a bigger house: it was cheaper because we moved from a detached into a terraced. You could also move from an expensive area to a cheaper one. It is, of course, fraught with risk, and the house market would have to be on the rise for this to work. As you say, this is not the best of times to invest in property.

mary

Dec 3rd, saw the "last flat for sale" in new development, originally on offer for £167,000, reduced to £147,000. Flat in a somewhat "posh" development in a small rural town in Glos. Already own 4 bed detached house in same town, worth £250,000+, which is let (inherited from parents). Put in an offer for £145,000 which was accepted by the developers. I calculated that they wanted to finalise the development and get rid of everything before 31st Dec. Major pressure put on to solicitors, lenders etc. to get the deal done and dusted within the short timescale.. Solicitor was asked to name his price to get someone in to do the exchange of contracts this week, so he asked for a cool £700 for the inconvenience factor for one of his staff to interrupt their Christmas holiday, and contracts will be exchanged on Thursday. I know that the developers are selling this flat at a loss (I am so upset!!!), but they were so desperate to make their books look good they were offering me an extra £1,000 to spend on additional expenses, like couriers if that would make decisions get made sooner. Took out a mortgage of £145,000 on parent's former house, so will buy the flat outright. Other identical flats in the development sold for £167,000 just two or three weeks earlier, so I feel quite pleased with my efforts so far. I guess it is a question of having your eyes open and knowing the local area and timing. Next stop find the tenant.

Doozergirl

mary wrote:

I know that the developers are selling this flat at a loss

Well done for getting a good price, but there is no way they're making a loss on your flat. Saves them money on staffing the sales office and selling within their budget period? yes. Making a loss? No way. Not even close.

tomstickland

Flat in a somewhat "posh" development in a small rural town in Glos.

Malmesbury, Tetbury?

Rave

mary wrote:

Took out a mortgage of £145,000 on parent's former house, so will buy the flat outright. Other identical flats in the development sold for £167,000 just two or three weeks earlier, so I feel quite pleased with my efforts so far. I guess it is a question of having your eyes open and knowing the local area and timing. Next stop find the tenant.

Right....so are you planning to 'flip' this flat for a quick buck? Or will the market rent cover the interest on your mortgage plus a decent return on your deposit?

Just interested to see how you think you'll be better off as a result of this deal?

IN_LIKE_EVERYONE_ELSE!

mary wrote:

Next stop find the tenant.

Good luck.

If you think they (the builders) have made a loss on this flat you are sadly mistaken, the materials cost on that flat were probably 15-20k. Look around and add it up, a few stud walls, stainless kitchen pack, plastic bath, ill fitting doors, plastic windows, cheapest materials you can find, bought in bulk.

That flat is now worth 20k less because the price you just paid will lower the value of all the flats in your area, you are behind.

Try and re-sell it for an exercise, if you make a profit I will eat my shorts.

Realism not cynicism.

EdInvestor

Hi Kenny,

You've described how people use a rising market to speculate, but you haven't explained why the market is rising.

Let's just look at supply and demand.

The supply of houses has not expanded by much, has it?

The movement has come from the demand side. Now has demand expanded by volume ( more buyers chasing the same number of houses) or by value (the same number of buyers but with more money to spend spend chasing the same number of houses)?

It's a combination of both, but mainly the latter, isn't it?

Because of low interest rates, people can afford to borrow much more money from the bank, and people with lower salaries, who formerly couln't get a mortgage, can now afford to borrow money too (home ownership is now 70% of the population,a generation ago it was less than 50%).

So they bid the price of the houses up. The more they have to spend, the more prices will rise, unless many new houses are built so that supply matches demand - in which cases prices will be flat - or exceeds it - in which case prices will fall.

Nothing to do with speculation. It's low interest rates (and low inflation)that are doing it.

What superscotsman is describing is what used to happen in the old days when we had high inflation and high interest rates.

tomstickland

That flat is now worth 20k less because the price you just paid will lower the value of all the flats in your area, you are behind.

I don't understand why you say that. One flat was bought for £20K less than the others. Why would that lower all of the flats' values?

wolvoman

tomstickland wrote:

I don't understand why you say that. One flat was bought for £20K less than the others. Why would that lower all of the flats' values?

It's pretty obvious really.

If 5 flats are sold for £167,000 and the sixth is sold for £147,000 then plainly the previous 5 flats were sold above market value. OK perhaps not quite as much as £20K difference because from the poster's account, the developers were trying to sell the flat quickly. But there is no way that the quick sale accounted for a 15%ish discount.

blue_monkey_2

Just reading this thread with interest. At the age of 34, married living with my husband and we have 2 children we live with my mother in her 3 bedroom house. We are on the council list and have been for the last 5 years without even a sniff of a place and won't for the ferseeable future either. With the 75k (ish) mortgage we can get we cannot even afford a mobile home now. We live and pray that the housing market will crash as we cannot afford a place of our own ever. Where will we go when my mother is not here to house us is anyones guess - there are 4 kids plus others so the house will get split so maybe we'll get 40k but that won't pay a deposit and a mortgage, a 3 bed place around here is around 175-200k. It is madness. There are others like us so demand will eventually fall, where do you get the money to pay the deposit? OK for the wealthy of us out there that have the finances behind you or wealthy families to get you on that ladder but for the working class person with average pay (I was on 12k for around 10 years) there is no way we will ever own our own house unless something significant happens somewhere along the line we will still be here for god knows how long. Just my thought really. Houses prices probably will rise but nothing significantly.