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

Doozergirl

wolvoman wrote:

I've no doubt the same posters arguing that selling one flat for £20K less DOES NOT reduce the market rate for them all, also believe that if the same flat had sold for £20K more then it DOES increase the market rate for them all.

Where do you get the logic for that then? One skewed property will have little or no impact upon house prices as a whole. 99% of homes will sell at the price that looks sensible when compared to other properties on the market at that time.

wolvoman wrote:

Similar to those who believe for house prices to fall just 20% there has to be a major economic 'event' whereas they can rise by 100% (as they have done) with no major economic event!

Er, yes of course. Rising house prices had nothing to do with recovering from a recession, nothing to do with sustained low interest rates making mortgages more affordable, nothing to do with low inflation, nothing to do with the fact that pensions have performed so appalingly that people have looked for other means to provide future financial stability...

Must have been all those £500 Changing Rooms makeovers increasing the value. :rolleyes:

wolvoman

Doozergirl wrote:

Er, yes of course. Rising house prices had nothing to do with recovering from a recession, nothing to do with sustained low interest rates making mortgages more affordable, nothing to do with low inflation, nothing to do with the fact that pensions have performed so appalingly that people have looked for other means to provide future financial stability.

And so using your arguments, the current drop in UK growth should have a downward impact on house prices and the fact that the stock market is currently growing at around 20% per annum should switch money back to shares from property.
I agree that interest rates are still very low but whether mortgages are really affordable is questionable. If mortgages are so affordable, why is there a dearth of first time buyers? And don't forget the US has raised interest rates every month for a year. The European Central Bank rates are rising for the first time in several years. There will be tremendous pressure on UK rates to follow suit.
Inflation - well low inflation certainly can't boost house prices because low inflation means low wage rises.


I'm not saying house prices will fall, or will rise. But I just don't understand the mentality that it is perfectly rational for houses to increase by 100%+ over a few years, yet completely irrational to suggest houses may hand back 1/5th of that increase. It sounds just like the city traders in 2000 advising people that the internet was the new economy and that tech stocks would continue to go up and up........

Doozergirl

Wolvoman, we agree then. I don't think house prices as a whole can fall 20% in one year though simply because homeowners won't sell at those prices in the short term and they just won't move house. The extra bedroom becomes less important if they feel poorer. The people that buy and sell are those that need to and can afford to.

And I totally agree that houses are not a good speculative investment in the short to medium term unless you're prepared to do the work to make the money. In which case, it's a full time job that you enjoy.

We're seriously considering renting later in the year because it's entirely possible to rent a bigger house for the same money as our interest payments. We'll still continue to put our money into property though because it's our business, I know shag all about the stock market and I have to feed my children!

I don't understand your comments when you say "But I just don't understand the mentality that it is perfectly rational for houses to increase by 100%+ over a few years, yet completely irrational to suggest houses may hand back 1/5th of that increase" simply because I've never seen it argued on this board that the huge rise is rational, and from those that voice their opinions, I don't think there's anyone that's particularly bullish at all.

superscotsman

zag2me wrote:

Every country is the same, overtaxed, underpaid, blah blah blah

The only thing that isnt overtaxed in the uk is property, its virtually tax free which is why everyone puts their money into it.

LOL


Every country is the same? Who told you that? No, don't tell me. [cue menacing music] The Government.

My son has just come back from Dublin. He got the shock of his life. The police were out on the street instead of zipping round in cars or cowering in the police station, only coming out to intill zero tolerance...to motorists.

They don't send any pensioners to prison in Holy Ireland for not paying their council tax: they don't have any council tax.

Incidently, the bureaucrats in Rip Off Britain made such a mess of my son's passport application that I've applied for an Irish passport instead. I've never been so well treated by bureaucrats in my life.

tomstickland

tomstickland Quote:
Flat in a somewhat "posh" development in a small rural town in Glos.
Malmesbury, Tetbury?
No, Stonehouse

Aha, I live in Gloucester and know Stonehouse well. David Wilson have built flats on the old Wycliffe junior school site, where the old house "mysteriously" burnt down, plus they've build some more on another school site.

With regard to first time buying, I find it annoying when people say that mortgages are affordable. Yes, rates might be low, but I still have to borrow more money than I would have needed a few years ago.

I'm happy to wait for 2-3 years to see what house prices do.

nmiah786

Thank you to everybody who has voted so far

Also thank you for all the comments. I appreciate that a simple yes or no will never enough to answer the question that I posted. The reason I did not want too much comments was becuase we will always have this never ending debate and everybody will have their own opinion, clearly evident by how long this thread has become.

I just wanted to see in terms of numbers what people thought. I apologies if I offended anyone when I request for no further comments. :beer:

The results so far is very interesting indeed. I suppose it can be interpreted in a number of ways.

This is my take on the results;

Clearly theres 10% more people on here who thinks prices will increase as opposed to no increases in the next 12 months.

55% of people think that prices will increase while 45% of people think prices will not increase in the next 12 months.

Are these 55% of people current home-owners who hope that prices will increase so that they can sell and move up the ladder? Are they investors who are hoping their investment increases in value so that they can either sell up or remortgage and make further purchases?

Also, who are these 45% of people who think prices will not increase?

Some posters have mentioned above that the results shows stagnation where vendors are not willing to lower their asking prices while at the same time potential buyers are not willing to pay these high prices!!! How can that be sustained?

I suppose some BTL investors will just hold on to their property as long as it takes to make a good return as the rental is just about covering their interest only mortgage payments (going on the basis that the investment property is mortgaged) and they are hoping capital appreciation next year, if not the next and so forth. Please no comments about mortgage payments being less then rent, the rent I get from all my properties more then covers my mortgages & costs involved, with a fair bit spare (which I use to overpay my mortgage).

At the same time I also suppose BTL investors whose rental does not cover their mortgage will eventually have to lower their asking prices if buyers will not pay the prices hoped by the vendor. But surely someone who really needs to buy a property or needs to make that move up the ladder will eventually end up paying these high prices!!!

Anyway I'm about to created another poll "Will you be buying in the next 12 months"......So please do vote on that as you have do on this

tomstickland

Make a new poll with 4 options:
-rise & own home
-fall & own home
-rise & don't own
-fall & don't own

nmiah786

tomstickland wrote:

Make a new poll with 4 options:
-rise & own home
-fall & own home
-rise & don't own
-fall & don't own

Thats a good idea...I'll think about it....need to go out now....maybe later in the night.....Thanks for the input.

Kenny4315

nmiah786 wrote:

I suppose some BTL investors will just hold on to their property as long as it takes to make a good return as the rental is just about covering their interest only mortgage payments (going on the basis that the investment property is mortgaged) and they are hoping capital appreciation next year, if not the next and so forth. Please no comments about mortgage payments being less then rent, the rent I get from all my properties more then covers my mortgages & costs involved, with a fair bit spare (which I use to overpay my mortgage).

At the same time I also suppose BTL investors whose rental does not cover their mortgage will eventually have to lower their asking prices if buyers will not pay the prices hoped by the vendor. But surely someone who really needs to buy a property or needs to make that move up the ladder will eventually end up paying these high prices!!!

I feel that these comments are somewhat lacking in detail. BTL investors who are not making any cash or even a loss, will be out and I would say fairly quickly. If prices do fall or at best remain static, what's the point on having all the hassle and risk of BTL. As a former BTL who has cashed in his chips, anyone who has bought in the last 2 years is unlikely to be making any gain from this investment, once all costs are taken into account, and also items such as under-utilisation is taken into account. Take my area 2 bed terrace in ok condition to let out £130k (static for past 12 months), lets assume a 100% mortgage (on the basis of ease and that although mortgage reduced you could have used the cash elsewhere (opportunity cost)). At say 5% thats interest of around £6500 pa or £541 per month, before other fees. From my experience of these places they are getting rent of up to £500 pm result the only way to make in pay is for price growth which has now evaporated -- end result loss. Thats assuming a static market or very low falls, get into 10% + falls and lots of BTL's are going to real the pinch, both on the main house often used to remortgage and on the BTL investment. The only ones safe are those who bought a good while ago, but even those would be better off cashing in and holding the cash in shares that are rising way more than houses at present with little or no serious risk.

nmiah786

Kenny4315

My comments are lacking in detail because this property debate is very uncertain to a certain degree. Although logic says prices should come done but in reality its far more complicated.

What I dont understand is how can a BTL investor afford to sell their property at a loss (assuming prices drops by 10%) when the rent that they are getting is just about servicing his mortgage and associated. Would the BTL investor not just grind his teeth and hold on hoping for some capital appreciation (I'm talking long term i.e.more then 5 years).

Figures:

Property price £180k, 85% Mortgage = £153k, Deposit = £27k
Mortgage Payments (interest only) @6% = £9180 p.a. = £765 p.c.m.
Rent Acheived = £800 p.c.m = £9600 p.a.
Profit Before cost = £420 p.a. = £35 p.c.m

10% Price fall on £180K = £162k

Lets assume BTL investor sells at £162k resulting in after clearing mortgage of £153K = £9K left over before paying EA & Solicitor fees.

This results in a loss of over (£27k - £9k) = £18k. The BTL investor simply would not be able to afford that. So he holds the property for say five years in the hope that prices will increase @ 3% p.a. so after 5 years the property should be worth roughly £208K if you take £180k as the present value or worth £177k if we take the 10% price fall value.

So should the BTL investor sell in 5 years time he is left with either (£177k - 153k) = £24k or (£208k -£153k) = £55k before associated selling cost and tax.

So thats why I dont see why BTL investors who made a poor decision to invest in property in the first place (within the last 2 years I'm being told) would suddenly decide to make more losses by selling.

Obviously this is only my opinion and I have made lots of assumptions and ignored a lot of other cost (I'm not sure if my working out of 3% growth for 5 years is correct) but I hope this gives a more clearer idea why I dont understand why a BTL investor would suddenly sink ship rather then wait. CAN THEY AFFORD TO!!!