Property crash soon???

lynzpower

am I missing something here?

I see people in my own freinds and family group, take my parents as a classic example.
They bought their home ( needed work, true) for 89k 6 years ago. Theyve put in a new bathroom, kitchen and done the garden. Its, for them, a home to live in. they live on an avenue of 20. 10 of those have been up for sale in the last year and a half and not one of them has gone for less than 350. I said sell it, if theres muppets around that will pay it, then cash it in. Its not that great a house IMHO and for 350 round there you'll get something amazing. They cant be bothered, fair enough. But they see my point.

So the markets "slumping a bit", so say they sell for 300, or at worst 250. Still a fair gain, anyone would agree. It would have to take one hell of a crash to reduce the "value" of less than what they paid for it.

NSR2

Well I'm a potential FTB in SW london, with an inheritance.
So I can afford a property.
I'm trying to make up my mind.
The evidence suggests the falls in house prices in my area will continue.
(yes you read that correctly).
http://news.bbc.co.uk/1/shared/spl/hi/in_depth/uk_house_prices/regions/html/region10.stm

I suspect IRs will go up, but only after the pound falls in price further.
I believe the overall cost of living will increase.

I would like to buy, and I'm actively looking to be proved wrong..

ffacoffipawb

Live-on-Less wrote:

This will hopefully get all you prospective first time buyers, or indeed anybody else contemplating taking on a bigger/more expensive house thinking.

It really worries me that so many people are getting into something (that in my opinion) is going to cause them so much future misery when prices collapse as I think they must.

1. House prices are are now at record highs in relation to earnings. Property pundits - usually those with a vested interest in prices staying high - will go on about today's low interest rates, and how "affordable" property now is. Don't just look at the interest payments, look also at how much a month you will have to find to repay the capital over 25 or 30 years?
How can something that has doubled in price over the last 5 or 6 years now be "more affordable?!" :eek:

2. When you look at what drives the house market its interest rates sure enough, the cost of money - like any other commodity - affects demand. However, absolute house price levels don't much affect those who have had a house for some time and are moving sideways - if you've already got a house and move to another similar one you aren't much bothered if it's £80,000 or £800,000, you've got to live somewhere. (Moving costs - stamp duty, legal fees etc do of course go up - it's sooo expensive to move today for this reason.) So, house price levels only really affect first time buyers and those moving up in size, usually younger people. The lenders have actually contributed to this housing bubble by progressively relaxing their lending criteria, bigger earnings multiples and self certified mortgages have played a large part in driving up prices to their present crazy levels.

3. The "Buy to Let brigade" have also driven them up by increasing demand for smaller properties, and competing with first time buyers. I personally know of people who have actually borrowed on credit cards in order to fund deposits for buy to lets. Buy to let makes no sense today, the yields on your investment are pathetic, they are just hoping prices continue to rise.....

The market is currently teetering on the edge, any upset in the general economy will precipitate a crash. Those who have recently entered the market will be left with massive negative equity, so if you are thinking of buying, very carefully compare the true total costs of renting vs. buying, and you'll probably find it's cheaper to rent and wait until prices fall to more normal levels in relation to earnings. The end. Phew! :T

You are bialystock and I claim my £5.

meanmachine_2

lynzpower wrote:

am I missing something here?



So the markets "slumping a bit", so say they sell for 300, or at worst 250. Still a fair gain, anyone would agree. It would have to take one hell of a crash to reduce the "value" of less than what they paid for it.

Lynz, read your post again very slowly.

A very ordinary house, of which there are loads on your street, was bought for 89K and is now "worth" 350K.

Now to my mind, it's 6 years more decrepit and therefore worth less than when it was orginally bought. But that's just because I'm not stupid.

Everyone else is insane.

Now ask yourself this: if your parents had to buy their house all over again, would they be able to? If not, who can?!

It's all going to end very nastily - either with a huge recession (people my age and younger will have no money to spend on anything other than huge mortgages), or house prices will eventually have to fall. One of those will happen. The question is: which?

manhattan

sm9ai wrote:

Theres plenty of houses. They just sitting empty thanks to btl'ers and second homes.

What the point of building new ones, it will be the same people who will buy them.

i think people who own more than one house should be taxed right upto their A$$ !

without these house wh0res,young ftb'ers may have a chance to own their own home!

wibble68_2

meanmachine wrote:

It's all going to end very nastily - either with a huge recession (people my age and younger will have no money to spend on anything other than huge mortgages), or house prices will eventually have to fall. One of those will happen. The question is: which?

Most level headed people would agree with you.

But I'm afraid we don't live in a level headed country.

With Tony and Gordon (two of the biggest habitual liars I've ever come across) running the country, anything could happen.

The trouble is most of the country seems to believe in what they're saying.

I fear the long term economic picture could get very nasty indeed.

sheffield_lad

ffacoffipawb wrote:

.The market is currently teetering on the edge, any upset in the general economy will precipitate a crash. Those who have recently entered the market will be left with massive negative equity, so if you are thinking of buying, very carefully compare the true total costs of renting vs. buying, and you'll probably find it's cheaper to rent and wait until prices fall to more normal levels in relation to earnings

Wait how long? FTB who read the HPC (House price crash) web site when it was set up in early 2004 may have waited splashing out rent for 2yrs for what? And if this crash ever comes will the level be below the 2004 price?

I wonder if it's time to set up a rival to HPC showing how much FTB have lost not buying then! :rotfl:

The world is changing the doom mongers think bust has to follow a boom it does not have to be the case the BOE now control interest rates not the guy who wants your vote. Lastly if and I mean if there was a crash how long would it before prices bounced back? Would property developers not jump at the chance of a bargain?

lisyloo

but what happens when the house isnt worth what the person paid for it?

Well firstly this is why lenders don't usually gives mortgages for 100% of the value of a property.

Secondly they often charge a MIG (mortgage indemnity guarantee) if you LTV is high.

This is an insurance policy for the lender.
The lender can claim from this policy in the situation you describe.

The insurance company will then pursue you for the debt so if you had other assets (e.g. a car) then potentially they could come after you for those.
If the person has died then they would go after the estate which would contain any other assets (cars, household contents, savings, shares etc.).

If the person has nothing then the insurance would loose out.

Lenders expect to "write off" a certain amount of bad debt.
They will price their products according to the risk.
So if for example you want a 100% mortgage then you probably have to pay a higher interest rate than someone with 90%.
They will put some of the profit by to cover the risk.

No lender would consider me witohut buildings or life cover either.

Some will, some won't.
Are you sure you aren't being fobbed off by a sales person.
i.e. have you actually read the terms and conditions? or are you relying on what some sales person is saying to you.

Some sales people do lie sometimes to try and make money if they think they can get away with it.

BTW - did you try Britannia building society or Alliance & Leicester.

NSR2

howee wrote:

...

The world is changing the doom mongers think bust has to follow a boom it does not have to be the case the BOE now control interest rates not the guy who wants your vote. Lastly if and I mean if there was a crash how long would it before prices bounced back? Would property developers not jump at the chance of a bargain?

Sorry this makes no sense to me:
1) Politicians will typically avoid crashes like the plague. They are happy to get the credit for booms, but don't like to be responsible for the busts.
Having the BOE in charge of IRs makes crashes more likely, they don't mind being blamed. This is all fairly irrelevant anyway, the MPC in the BOE has a mandate to keep inflation within a target. That's all. That have NOT been told to keep IRs low for home owners!!

2)Property developers have popped up all over the place because of the general plan:
a) Buy cheap crappy property
b) Do it up
c) Sell property for profit.

In a crash this would happen:
a) Buy cheap crappy property
b) Do it up
c) Try and sell it, find no one wants to buy...

So property developers wouldn't buy in the first place.

Live-on-Less

Tassiotti let me quote you from your posts: :beer:

“eg./. I live in dartford.. you can pick up a 3 bed terrace house in Northfleet for the money you are looking at, and next year, the new international rail link can get you into London in 17 minutes. You have to be quick though, as I have bought up most of this area.”

“Just because you may not be financially secure, it doesn't mean everyone else isn't . (noisy neighbours...what???) You may feel hard done by by paying off other peoples mortgages (like mine) but then again, you will never own a property”.

“If they believe the drivel spouted by these people, then this adds to the aleady huge amounts of stress they will be feeling”.

“Cngratulations my friend and welcome to the world of the owner”

etc etc brag brag brag.

Well good luck to you with your 1.9million of assets, I wonder how much of that is mortgaged though? You only join the world of the owner when you have paid off the last of the capital! If prices crash you may end up owing more than your mortgage. If interest rates go up the payments may well be more than your rental income. Both these things will most probably happen together – that ought to wipe the smug smile off your face!

Common misconception No 1: “Rent is money down the drain.” What then is; mortgage interest, stamp duty, solicitors fees, mortgage fees, estate agents fees, and house maintenance –new roof, kitchen or windows anyone? Not forgetting the inflexibility of not being able to walk away if you want to move/separate/hate your neighbours/lose your job etc etc.

Only when house prices are relatively low, rising, and are not likely to fall much does buying for a FTB make sense. It’s not often that renting is cheaper than buying, but it is now, and that’s without taking into account possible falls in prices. Also, thanks to Tassiotti and his ilk there is a glut of rental property in many areas, unlike years ago when I was a FTB. That’s why I urge all FTB’s to at least consider renting as an option to living with parents etc.

Common misconception No 2: lynzpower has fallen into this one. If her parents sold today where would they live? They would have to buy another house surely, and a much smaller one at that in order to bank any cash, so maybe that’s why they don’t want to?

Lynz, £89k to £350k in 6 years? Sounds a lot to me, even by today crazy standards where on earth do they live?

meanmachine and manhattan raise good points. How on earth will today’s FTB’s ever pay off there mortgages? God I’ve struggled over the years, and I paid peanuts in today’s terms for my house, I earn good money, live in one of the cheapest parts of the country (Norfolk), and I don’t have student loans, and have always avoided credit. What happens when they have children/get made redundant/get ill/have an accident or any other of the things that life throws at you? There is no longer any slack to call on in hard times either financially, or in terms of labour – both partners are already working full time and it’s hard to work and earn more.

The BTL crew have certainly jacked up prices at the bottom of the market, pricing FTB’s out, and driving the market up generally. They are speculators, and if we had any kind of government that cared a damn for the well being of the majority, their lines of credit would have been stamped on long ago. As I said before if FTB’s weren’t able to borrow such high multiples, and BTL’s had to have 50% deposits we would not be in this mess. Reckless lending to speculators has created this bubble like all the others in history. Only this time it’s been condoned by the government in order to prop up a moribund economy and create the illusion of prosperity both here and in the US.

Final thought on this, according to recent press reports our very own beloved PM, our very own Tone, has mortgages of almost £4million, on a property portfolio worth maybe slightly less than that sum. I wonder; could this have anything to do with the lack of a property crash, and the bizarre world we now live in where everything in the economy is wonderful despite all the obvious signs of rot – yesterdays budget speech will surely become the equivalent of Chamberlains “Peace in our time” speech in the annals of future economic history. Tone and Gordybabe (and the Burning Bush US administration who have all the same problems) are desperate to prevent a crash, for the obvious reason that it will be much worse than anything we’ve seen before and maybe much worse than the ‘30’s if handled badly. The problem is; as the Tory’s discovered in 1991 when we fell out of the ERM having wasted billions, you can’t buck the market for ever. You can’t have economies that are totally dependent on “wealth” derived from credit and rising house prices, consuming but not producing.

How long will it take for the majority to see that the King is stark Bo!!*$k naked? :mad: