Are house prices set to take a tumble? February 2006

tomstickland

Well, I'm about to cross over from the "hope it crashes" camp into the world of property ownership. My opinion is still that prices will probably not quite match inflation in my area, but I don't expect a drop unless the whole economy runs into trouble. Either way, I've bought a flat that will cost me the same as rent would have cost, plus I can weather a 10% fall in value, and a 20% fall in value. A 50% crash would put me in a poor position, but I think there are others who are in more vulnerable positions.

Alleycat

I've given up on the idea of ever getting on the property ladder. We live in private rented and cannot even begin to think about trying to raise a 5% deposit and mortgage payments would be just too high anyway. I also refuse to pay stupid money and stretch myself beyond belief. Okay, so I won't have a property to fall back on, but at least I won't end up bankrupt or struggling to put food on the table.

I have to say I really HATE with a passion buy to let'ers. Fine you can afford to buy a house to live in, but at least let someone else have a go too. Oh no, you want a nice little pension pot, do naff all to keep the property in decent condition and charge rents that even a person on a decent wage struggles to afford.

I am praying for a price crash. I am sorry, but although I would love to buy a property I have waited and not stretched myself to afford it, so why do others have to be so desperate. If you can't afford it, don't have it.

I know this post is a bit harsh but it makes me so mad and yes, I am jealous that I can't do the place I am living in up as I don't know when I may get evicted as the landlady wants to make a quick buck. I want a nice house and decent garden for my baby to play in, but I just know that if we spend too much putting down turf, a fence, we will just get moved on as we have helped to add value to the property.

Anyway, we are going to move to London in the next year or so, when we have paid off more of our student and unemployment debts and live with my mum and dad whilst we get jobs and get a deposit and first month's rent together. Crazy? Yes, but I miss my mum and hate having to live over 200 miles away from her. I want a cuddle.

Rant over!

VincentVega

I'm inclined to agree with Marvin (and sympathise with Alleycat). It won't take much for there to be an oil price spike and for the economy to go down the pan. Perhaps an attack on an oil installation in Saudi Arabia. Perhaps the rhetoric between the US and Iran will ratchet up a notch. Modern Western societies are so utterly dependent on oil for everything, not just transport. I had a look around the house and the sheer number of things made out of oil-derived products is shocking. Looking at my desk, I see the coating on the desk itself, most of my computers, my iPods, my monitor, mouse and keyboard, parts of the lamp, a load of wires, a couple of vitamin bottles, some speakers and a coaster for my glass of water. It's totally ridiculous.

I did some reading recently on a concept known as "Peak Oil". It basically states that there is a finite amount of oil in the ground and plots out a graph which tracks oil production. Worldwide oil production will peak at some point and then we're all doomed, as the amount of oil produced will decline irreversibly. Not much oil is being found and the oil companies have in the past had to correct the estimates of their reserves in a downwards direction.

Our society is awash with debt (£1 trillion worth). Most of it is tied up in housing and credit cards. Lenders are throwing money at people like it's going out of fashion. If the economy tanks after an oil price shock or another terrorist attack, surely this unsustainable level of debt is the weak spot? There may be a flight from the dollar (into the Euro) and the Federal Reserve will have to stick rates up to make the dollar more attractive to investors. This will make mortgage payments unsustainable for many Americans. And, when the American economy catches cold, the UK follows suit. Bye bye cheap mortgages and credit. Hello negative equity and repossessions.

Sorry to all the homeowners out there, but I can't help but feel that a house price "correction" is greatly needed. I would love to buy myself a house, but I just can't afford to in the area in which I live. Greedy buy-to-let people (again, sorry) snapping up properties and forcing up prices for everyone else. Assuming there is a downturn in the economy (which is inevitable) and the housing market tanks (as it does, every time), what are all these people going to do? They'll be stuck with three or four properties which are worth far less than the mortgages state, which they won't be able to get rid of. People seem not to be planning for the worst - a complete lack of foresight and caution abound.

richiethekid

The way I look at it is this: I live in an area which is not particularly affluent, I earn a salary which I believe to be above average for the area. My other half only works part-time, as we have a baby to look after, a fact which is true of most couples our age (again, in our area). In short we should be in a better position than most to buy a house. Using traditional salary multiplier-type mortgage calculators, we might, if we really stretched ourselves, be able to afford something at the absolute bottom end of the property ladder, which would be far too small should we have another baby, but which we would be stuck with for years. To me, the only thing that can possibly happen (and again I'm talking locally) is for there to be a major correction in house prices so that first-time buyers can get on the ladder, so it's a question of when rather than if.

Former_MSE_Archna

Poll Title: Poll Started 21 February 2006: Will house prices crash? What will happen to UK house prices over the next year?

D. Increase 2-5% 35% (1752 Votes)
C. Increase 5-10% 17.5% (879 Votes)
E. No real change 14.2% (714 Votes)
F. Decrease 2-5% 7.4% (375 Votes)
J. I really have no idea 7.1% (356 Votes)
I. Decrease over 20% (crash) 4.9% (249 Votes)
G. Decrease 5-10% 4.9% (249 Votes)
H. Decrease 10-20% (smaller crash) 4.3% (219 Votes)
B. Increase 10-20% 3% (152 Votes)
A. Increase over 20% 1% (55 Votes)

Total Votes: 5002

richatbigrich

what a miserable bunch of cynics and complainers you lot are. this is a money saving website, yet you seem to be quite happy to criticise those of us who actually took the plunge and decided to take control of our financial future. i bought a house in 1998 when i had nothing. i took a loan out to be able to put a deposit on a house and worked for months on the place to make it habitable. everyone said i was crazy, and now apparently i'm greedy for letting the place out. that house is my pension, and i deserve every penny i get from it. you don't want to take risks? fine, but quit criticising those of us who are happy to.

shahidemran

Alleycat wrote:

...
I have to say I really HATE with a passion buy to let'ers. Fine you can afford to buy a house to live in, but at least let someone else have a go too. Oh no, you want a nice little pension pot, do naff all to keep the property in decent condition and charge rents that even a person on a decent wage struggles to afford.
...

Check this man, Ajay Ahuja, owner of 100 homes who has made £6m fortune in seven years.

Full Story: HERE

bookworm1363

We bought our house in 1996 for £ 58000. We bought a 4 bedroom house in an area that was cheap because it had a bad reputation (totally unjustified, incidentally). Then, they built a tram link and more and more people started looking this way for property. Because 4 bedroom houses are rarer then 3, we are now in a position where if we sold tomorrow, we could ask and get £ 170000. This is our nest egg, the only security we have. At the rate pensions are going, this house will be the only thing between us and poverty by the time DH retires. We worked hard and borrowed to get ourselves out of the council tip we were living in, and as far as I'm concerned, the higher the prices stay, the better. So a lot of people can't get on the property ladder? Well, neither did we to start with, so we lowered our sights. And I'm pretty sure that for every person who complains about the high prices, there's a least another one who is grateful for them.

ML

skaff

When me and my wife bought our first (yes first) house we were up to our eyeballs in debt. We had to go cap in hand to our family for the deposit and take a high mortgage rate as no-one else would touch us. Why did we take that risk? Because it was 1997 and i decided that prices could only go one way from there. What does that make me? Lucky? A genius? A b@stard? All of the above?

What it makes me is someone who made a decision that i thought was the best for my family. I'm happy it worked. I used the success of that to fund a couple more to gain some financial future. Do i feel guilty? Do i heck. When the dot com brigade made their fortune i didn't look on with envy nor did i rub my hands with glee when it all went wrong for them. These people have babies just like yours and want to see them playing in gardens just like you do. People make decisions. You chose not to get a house because you feel it would overstretch you. I don't look badly upon you for that. Don't think bad of me simply because i chose differently.

Finally, for those with the mindset of price correction being based on the inability of average workers to afford prices in the area I have one question. If that logic is valid then why is London not empty?

Marco

nelly_2

skaff wrote:

When me and my wife bought our first (yes first) house we were up to our eyeballs in debt. We had to go cap in hand to our family for the deposit and take a high mortgage rate as no-one else would touch us. Why did we take that risk? Because it was 1997 and i decided that prices could only go one way from there. What does that make me? Lucky? A genius? A b@stard? All of the above?

What it makes me is someone who made a decision that i thought was the best for my family. I'm happy it worked. I used the success of that to fund a couple more to gain some financial future. Do i feel guilty? Do i heck. When the dot com brigade made their fortune i didn't look on with envy nor did i rub my hands with glee when it all went wrong for them. These people have babies just like yours and want to see them playing in gardens just like you do. People make decisions. You chose not to get a house because you feel it would overstretch you. I don't look badly upon you for that. Don't think bad of me simply because i chose differently.

Finally, for those with the mindset of price correction being based on the inability of average workers to afford prices in the area I have one question. If that logic is valid then why is London not empty?

Marco

How much was it in 97?

How much is it worth today?

If you could barely afford it then, what could you possibly do today?