Another 50% to fall off property - Robin Griffiths (Expert Economist)

Dithering_Dad

the_ash_and_the_oak wrote: »

No not really - picked 5 as seems to be around the average that ftbs stay in first place - its really that which makes me think buying now isn't such a good idea because may negatively impact deposit available to buy 2nd place. thought your idea about buying now to avoid higher rates made a certain sense if moving into somewhere super long term - but didnt understand so much how it would work if buying an FTB place and selling after the average of 5 or 6 years.

agree that someone keen to buy now won't be so into renting for another 5 years - just looking at it more in terms of numbers more than anything else really

One tends to sell not because you suddenly think "Oh, I've been in this house 7 years, which is the average time some is in a house, it's time to move!". People move because of life events such as divorce, marriage, having children, getting a new job, emigrating, deaths and a whole host of thing, some of which you can plan for and others that come as a surprise.

It may indeed be the case that someone could be buying now and then sell in 5 years (lets say because their partner died and they wanted to downsize). But that life event will occur whether they buy now or not. If someone waits 3 years to buy then they'll be selling after 2 years due to the death. What you're really advocating is never buying because things might happen and you'll have to sell the house.

Some guys on here try to plan a little too much. I am planning my mortgage for 5 years hence because I am hopeful (and it's within my power) that I'll be mortgage free by then. I will therefore only fix for 5 years. I actually believe that in 5 years time the economy will be radically different that it is now and perhaps a fix may not be necessary - other people are different and may think we need 10 years.

Everyone has different circumstances and objectives and should plan accordingly. as ever DYOR!

Dithering_Dad

Graham_Devon wrote: »

"I don't want to prove you wrong."

"I do not believe you can do any of what you say"

Hmnn, aren't these two statements a little incongruous?

It's not a case of being proven right or wrong. What I say could be totally wrong for one person and totally right for another. That's the point and that's why I keep saying DYOR!!

I keep saying this, but people keep ignoring it... I'll say it again for clarity:

"My advice is aimed at people who are thinking of buying in the next 18 months".

These will not be the people who think that the crash will still be continuing in 5 years time. These are not people who think that house prices have another 40% to fall. These are people like me who believe that the dramatic falls over the last 16 months will not be repeated over the next 16 months.

If you're the former, then my advice is not for you.. move along, nothing to see..

Chris2685

Dithering_Dad wrote: »

As I said, do the calculations yourself and if it makes sense to buy then buy, if it doesn't then don't.

However, I can't imagine that there aren't too many FTBers who are looking at buying a £230k house with a £40k mortgage (i.e. people who have £190k deposits saved up). Do you?

Indeed, your chap should be looking at £190k houses and being rent/mortgage free forever.

Out of interest, how much is he paying in rent? (I assume that he's renting in similar style accomodation to what he's considering purchasing?)

Certainly in my area, you'd be looking at around the £900 pm mark for a property like that. If he bought with the alliance and leicester mortgage that was available last month (fixed for 5 yrs at 3.99%), he'd have an interest only mortgage of £133 per month!

Each month he'd be saving £667 by owning a home than renting. Though as long as he's getting around 4.5% on the £190k savings he'll be OK....

Calculations, calculations....

Hey, I can speak for myself you know :P

I am currently paying £850 rent on a 2 bed apartment (with access to pool and gym and nicer looking than that house!)

I would rather be paying less, and probably could if I moved out and lost some of the luxuries.

I am renting a 2 bed, but if I bought I would need to buy a 3 bed. We have a baby who will soon need to be in her own room, and plan on having another child within the next few years or so, meaning we would probably need to upgrade sooner than 5 years time. There is no point buying a 2 bed for 5 years now and then possibly seeing the value drop another 25% and add onto that the actual costs of buying, it really isn't worth our first house being anything less than a 3 bed.

I have seen it a lot on these forums 'why do people think their first home should be a 3 bed semi' etc, but the simple fact is that I would rather rent a 2 bed for the short term and jump straight onto a 3 bed, it is cheaper in the long run - especially in a falling market!

the_ash_and_the_oak

Dithering_Dad wrote: »

One tends to sell not because you suddenly think "Oh, I've been in this house 7 years, which is the average time some is in a house, it's time to move!". People move because of life events such as divorce, marriage, having children, getting a new job, emigrating, deaths and a whole host of thing, some of which you can plan for and others that come as a surprise.

It may indeed be the case that someone could be buying now and then sell in 5 years (lets say because their partner died and they wanted to downsize). But that life event will occur whether they buy now or not. If someone waits 3 years to buy then they'll be selling after 2 years due to the death. What you're really advocating is never buying because things might happen and you'll have to sell the house.

Some guys on here try to plan a little too much. I am planning my mortgage for 5 years hence because I am hopeful (and it's within my power) that I'll be mortgage free by then. I will therefore only fix for 5 years. I actually believe that in 5 years time the economy will be radically different that it is now and perhaps a fix may not be necessary - other people are different and may think we need 10 years.

Everyone has different circumstances and objectives and should plan accordingly. as ever DYOR!

wouldn't say I'm advocating never buying tbh. kinda more that I'm thinking an FTB looking at a flat is probably going to want to upsize in around 5 years and might want to take into account what they think the situation will be around that time (for a house to live in permanent think situation differs here). From a purely financial point of view don't think I'd look at buying in the next 5 years tbh (not for a flat anyway)

agree that people should DYOR and have agreed w you all along about thinking about buying before rates increase if you need a house soonish (for long term house at least but not really for flats imo) - but thought this really needed a caveat regarding any moves during this period w loss of equity leading to reduced deposit and back at square one re:IR for subsequent moves

feeling risky to buy a flat imo unless not really planning to upsize into a house in next 10 years

Dithering_Dad

Example for Graham:

Hi, I'm Tom and I live in Bury, Lancashire. I rent a two bed house for I rent a two bedroomed house for £595 per month and have been saving up for my own place for quite a few years and I now have a deposit of £40,250. I want to buy a house thats similar to what I rent and have found this a bed terrace up for sale at £119,000. I put in an offer of £115 and it was accepted because the economy and house market looks bleak currently and this really helped in my negotiations.

I subscribe to a forum called MSE and saw a thread that discussed a 5 year fixed deal with A&L that was fee free and required a LTV of 65% and so I rushed in my application and secured the cheap fix.

My mortgage will therefore be £74,750 at 3.99%. I went for interest only because I want to make large overpayments as and when I can afford them. This means I will be paying £248.54 per month on my mortgage, a whole £346.46 per month saving on my rent - which is far greater than the £100.63 I'm making on my £40k savings at 3%.

I move into my lovely home and saving £346.46 every month, but meanwhile the housing market continues to fall and interest rates begin to climb. By the time it reaches the bottom in three years time, my house has lost 15% in value and typical mortage interest rates have reached 12%.

Had I bought now rather than 3 years ago I could have gotten my house for £17,250 cheaper. My mortgage would have been £97,750 with a monthly Interest Only premium of £977.50 per month.

Over the three years I have had my home I have saved £12,472.46 in rent (£346.46 x 12 x 3) and over the 2 more years that my fix is in for, I will save (£248.54 x 12 x 2) £5964.96 in interest payments between my fixed rate and current mortgage rate.

Therefore by buying now I not only have enjoyed my own home for 3 years (which I cannot put a price on), I have saved a total of £18,437.42 in rent and mortgage payments. Had I stayed in my rented accomodation I could have saved £17,250 due to the continuing HPC. I have also saved money because while we were in recession I had some work dopne on the house and tradesmen were clamouring for business and carried the work out at almost trade prices. I also found that materials were cheap for the same reason. I furnished and decorated my house much cheaper because of the sales and cheap prices available in a recession.

Of course these are just my own calculations and everyone is different, so they should do their own research on how much further they think the market has to fall and how much they think interest rates will climb to.

HAMISH_MCTAVISH

brit1234 wrote: »

this baseless spin

Indeed......:D

Jimmy_31

HAMISH_MCTAVISH wrote: »

Indeed......:D

Indeed......:D

reweird

50% off. What a load of codswallop. The only 50% off will be the value of your deposits as the currency is devalude.

GDB2222

To be fair to Brit, the last time there was a property crash around 1990, the govt let the market fall and find its own level. The yanks are doing that. In the UK, this time round the govt is artificially supporting prices, as otherwise the banks would be even buster than they already are. The govt plan is clearly to stoke up inflation whilst leaving nominal house prices steady. With inflation at 5%, we've seen a 20% drop in real terms so far, with every likelihood of at least another 2 to 3 years ahead of us of static prices and highish inflation. If I'm right, then we will be looking at a 35% real drop in house prices, which is the sort of level I though was needed to get back to some sort of normality.