Property crash soon???

Pal

F_T_Buyer wrote:

Remember: Wealth is never lost, it is merely transfered.

Alas this isn't true. The world is awash with free, brand new money, much in the form of mortgage credit.

meanmachine_2

tomstickland wrote:

Well, I've been looking at rental prices in the local paper tonight. In Cheltenham and Gloucester a studio flat is about £300-£450 pcm, a 1 bed flat around £450-500 pcm and 2 bed flats/houses £450-£600 area.
My 1 bed flat that I'm buying will cost me £490 per month (repayment mortgage + service charges), so I'm paying slightly more than the average rental price for the same property.

So your property costs exactly 80K?

Where are you buying? Bulgaria?

I think you've been a bit silly and factored in your deposit mate. That doesn't count, I'm afraid - opportunity costs and all that.

tomstickland

So your property costs exactly 80K?

Where are you buying? Bulgaria?

I think you've been a bit silly and factored in your deposit mate. That doesn't count, I'm afraid - opportunity costs and all that.

My propery cost £86,500 in total, with a £10K deposit that I've saved since last March.

£76,500 mortgage at 4.3%.

£10K is £500 pa if I were to leave it in 5% ISAsetc, so that's another £41 pcm of opportunity cost.

It's not in a grot spot or in need of work. It's just a modest flat in a tidy block next to open space on a late 80s "bovis home" estate in a so-so small town on the edge of the Stroud valleys.

meanmachine_2

Pal wrote:

Alas this isn't true. The world is awash with free, brand new money, much in the form of mortgage credit.

Oh no dear boy.

The money transfers out of my pocket, into that of a homeowner, into that of the Chinese.

There it stays - for the time being. Tick tock tick tock...

When the Chinaman finally starts to go shopping....prepare for the worst.

Pal

tomstickland wrote:

Well, I've been looking at rental prices in the local paper tonight. In Cheltenham and Gloucester a studio flat is about £300-£450 pcm, a 1 bed flat around £450-500 pcm and 2 bed flats/houses £450-£600 area.
My 1 bed flat that I'm buying will cost me £490 per month (repayment mortgage + service charges), so I'm paying slightly more than the average rental price for the same property.

That is the sort of analysis that is worth doing when deciding whether to buy at the moment, however it depends on a couple of things remaining constant...

- Mortgage interest rates have to stay constant so your interest doesn't go up;
- The rental market has to stay the same so the equivalent doesn't fall or rise;
- You have to live in that flat for long enough to pay the mortgage off, so no growing family, no change of job, no wanting a garden etc etc.

On all those assumptions, it is worth you buying. Good luck to you. The question is whether you would have been better off renting for a couple of years and then buying at a lower price (and lower mortgage repayments)?

Who knows? Not me. But that is where the economics debate comes into it....

meanmachine_2

tomstickland wrote:

My propery cost £86,500 in total, with a £10K deposit that I've saved since last March.

£76,500 mortgage at 4.3%.

£10K is £500 pcm if I were to leave it in 5% ISAsetc, so that's another £41 pcm of opportunity cost.

86K for a one bed flat? Not down my way mate.

But good luck with your purchase.

Pal

meanmachine wrote:

Oh no dear boy.

The money transfers out of my pocket, into that of a homeowner, into that of the Chinese.

There it stays - for the time being. Tick tock tick tock...

When the Chinaman finally starts to go shopping....prepare for the worst.

So what if the Chinese or someone else gets the money? All you have to do is sign on the dotted line and, lo and behold, you have more money! Out of nowhere!

Isn't the modern world great?

tomstickland

Oh yes, I've been very much on the pro-crash camp for a long time, but in my situation I've found that I can afford to buy for similar prices to renting. I still think that properties are overpriced, hence why I've borrowed 50% of what I could and I'm prepared to sit out any housing price drops.

Thing is, I know several people of similar age to myself (early 30s) who've bought properties recently, by being careful with money and/or money they've inherited etc. Such activity is keeping the housing market just about going at the lower end. A big question is how many people are there just on the fringes who would move in and buy if prices dropped a little? Or would they wait?

meanmachine_2

Pal, I'm no expert, but I thought the reason why West govts had got away with printing so much money in recent times - without triggering inflation - was because the East was squirrelling it away for a rainy day.

Once the East starts competing for their own goods, then DVD players etc will start going through the roof - and with in inflation.

But I could be wrong on that.

Pal

tomstickland wrote:

Oh yes, I've been very much on the pro-crash camp for a long time, but in my situation I've found that I can afford to buy for similar prices to renting. I still think that properties are overpriced, hence why I've borrowed 50% of what I could and I'm prepared to sit out any housing price drops.

Thing is, I know several people of similar age to myself (early 30s) who've bought properties recently, by being careful with money and/or money they've inherited etc. Such activity is keeping the housing market just about going at the lower end. A big question is how many people are there just on the fringes who would move in and buy if prices dropped a little? Or would they wait?

Completely agree. There are lots of reasons for buying, both financial and non-financial. There are also lots of risks. What annoys me about a lot of these threads are the people who come on here saying stupid things like "house prices always go up", which is blindingly obvious over any long enough time period, if only because house prices tend to keep pace with wage inflation. That doesn't answer the real question as to someone might be better off by waiting a few months or even years before they buy.

There is a good argument at the moment for renting, especially for bigger houses in the SE of England where rents are a lot cheaper than mortgage interest. However in other places and property types there may be good reasons to buy.