Can the housing market survive...

Graham_Devon

...Without first time buyers?

Reason I ask is FTB's have got the rough end of the stick for the last 5 years, for anyone that did buy, they are now dealt a blow, for those that didnt buy, they are dealt a blow.

FTB's who didnt buy, now have naff all interest on any savings they made for deposits (20k saved will get you about 40 quid a month if that), about to be handed a huge tax burden, job prospects are less than they were, and mortgages are increasingly harder to get, more expensive in terms of fees and interest.

So bit of a double whammy, less interest on savings, but higher interest on any new mortgage.

Predicitons are about 20-25% off peak, which would mean house prices around 140k average. Meaning deposits of around £28,000 would be needed, and then payments of around £900 per month, and rising.

So lets say 110k average for the starter home, to avoid the "FTB should not have a average home" argument. That's still £22,000 deposit and around £800 a month payments.

From my experience, and the experience of all those around me my age, that makes it pretty impossible for a FTB to enter the market, if it bottoms out at 25% off peak. Select few, of course, will be able to.

I know there will be talk of local areas...FTB's should move, should buy a 1 bed flat etc.

But, I'm not interested in that, its done to death on the other threads. What I'm interested in for discussion is can the market survive, if the bottom is 25% off peak, and FTB's are once again, alienated? This time not due to the prices as such, but due to their contributons they have to make to the economy to pay off the debt which came through the excess of the generation before them.

Really2

Deposits will drop when house prices stabilize.

The deposit at the moment is the banks hedge against drops and repossession.

The market is actually up on yoy figures now (as may 08 was when things really went bad) with more FTB so it looks like it as survived so far.

If prices fall another 10% and deposits drop to 10% that will make them fairly affordable to most people on a reasonable wage.
EG young proffesionals

Pobby

Food for thought Graham. Thanks.

wolfman

It certainly won't recover as fast without them. Bottom of the food chain, but still important.

If FTB's can't get into the market, it'll remain slow, given that BTL has eased recently. Like many have said a period of depression where houses stagnate.

With interest rates increases looming, I won't be taking any risks myself. I've got a fair chunk saved up, but by London prices not enough. Think I need another 20k and I'll be ok. In fact I currently don't see many suitable properties, and I don't think I could get a very good mortgage anyway. So just have to wait.

Graham_Devon

Worth remembering that the FTB market, i.e. the typical house a FTB would have bought, was propped up in the last 5 years not by the FTB, but the BTL landlord.

So, are they going to prop this sector up still?

I don't personally believe they are.

So if prices stay this high, and FTB's cant buy, BTL's are not buying. Then who's going to take this market? What's going to keep it going? And if that huge part of the market is not utilised, because BTL's dont want it and FTB's want it but cant have it, can the rest of the housing market really survive?

Seems to me, the only way out of this, if the market DOES bottom out at 20-25%, is wage inflation? Either that, or affordable house prices which means further large falls.

Graham_Devon

Really2 wrote: »

Deposits will drop when house prices stabilize.

Isnt this a two edged sword though?

Say they stabalized at 20%. Very close to what we are now. Lenders start lending 90% again.

Were back to stage one. FTB's can't buy, like the 5 years of boom. We know the BTL market was buying up the FTB houses and we know FTB';s could not buy. So we will have achived, nothing. Only thing that might achieve is BTL's come back to the market and prop up the FTB market again.

Really2

Graham_Devon wrote: »

Worth remembering that the FTB market, i.e. the typical house a FTB would have bought, was propped up in the last 5 years not by the FTB, but the BTL landlord.

So, are they going to prop this sector up still?

I don't personally believe they are.

So if prices stay this high, and FTB's cant buy, BTL's are not buying. Then who's going to take this market? What's going to keep it going? And if that huge part of the market is not utilised, because BTL's dont want it and FTB's want it but cant have it, can the rest of the housing market really survive?

Seems to me, the only way out of this, if the market DOES bottom out at 20-25%, is wage inflation?

Graham chill out are you the most impatient man on earth.

are you expecting "green shoots" over night.

When the banks think prices have stabilized and they drop their required deposits (to 10% or bellow) and IR rates closer to LIBOR .


All the bears will be at the EA's emptying their Hunny pots:)

Thrugelmir

Why just FTB's? The housing market is a pyramid. Knock 25% off a £500k house for some one with a £250k interest only mortgage. Thats a capital loss of £125k.

Still got £250k to repay on higher interest rates? Only left with £125k equity. So couldn't buy an average house outright for that at current prices.

Not only that but it was their pension retirement fund. Frightening thought. But for many reality.

Thrugelmir

Graham_Devon wrote: »

Worth remembering that the FTB market, i.e. the typical house a FTB would have bought, was propped up in the last 5 years not by the FTB, but the BTL landlord.

So, are they going to prop this sector up still?

Not until property yields hit 10% plus.

Graham_Devon

Thrugelmir wrote: »

Not until property yields hit 10% plus.

So they would have to fall if FTB's couldnt afford them (and they couldnt, we have that evidence) and BTL's were not buying?

Unless of course, the market can do without FTB's?

Graham_Devon

Really2 wrote: »

Graham chill out are you the most impatient man on earth.

What?

I'm simply asking a question and giving my reasons. I'm chilled, so don't get this?

It's just a dicussion up for debate