Why house prices are certain to fall

Generali

HAMISH_MCTAVISH wrote: »

Nope, pretty sure that was never a good idea. Buy old houses, they hold value better.

Oh, and you've gone from being mildly amusing, to completely barking.

In case you care.;)

Why is that do you think?

HAMISH_MCTAVISH

Generali wrote: »

Why is that do you think?

With mewbie, I'm putting it down to sexual frustration.

With houses, it's because the older ones are far better built.

I had a builder quote me to rebuild one of my old granite built houses as I did not believe the insurance companies estimate of rebuilding costs for the policy. Good thing I did so too, as the insurance company had massively underestimated the costs to rebuild on a like for like basis.

IveSeenTheLight

orangefender wrote: »

I'm with the majority; 8% further to fall means we're not near the bottom. We're at least another 6 months away from that.

Bear in mind this is a UK average.
By average there will be areas that are worse.
There will also be areas that fare better.

Best to know your local area, it could already be "at the bottom" or indeed it could drop by more than the estimated 8%

IveSeenTheLight

orangefender wrote: »

As I see it the case for a downward trend are:

1. banks are clearly nervous (hence low LTV mortgages and more robust lending criteria) - I expect this is because their "expert economists" don't need to come up with a new the headline for the press every week). This means there are far less mortgages suitable to FTBs available, who are the life blood of the market i.e. fewer buyers.

I've shown this before, but HSBC are offering 90% LTV for FTBers
http://www.hsbc.co.uk/1/2/personal/mortgages/first-time-buyer/fixed-rate;jsessionid=0000Uko8pixZYRCOGE7gV2CcTdy:12c58n73a

orangefender wrote: »

2. next year we will see a historic level of redundancies across the public sector (doctors, nurses and policemen perhaps excepted though a very small proportion of workers). Also, although we are hopefully over the worest of the private sector reducancies, recruitment will remain scarce for the young leaving education each year. This needs to be considered in light of the already high and increasing unemployment (which particularly affects the young/FTBs) i.e. fewer buyers

Unemployment is estimated to increase by a further 500,000, 1.6% of the workforce.
Agreed there will be more caution in making a property move if employment is a concern. Some people will not put their life on hold though

orangefender wrote: »

3. interest rates are at an all time low. Surely we can only expect a steady but sure rise over the next 24 months which will hurt all those stuck on variable mortgages and unable to remortgage i.e. fewer buyers for properties further up the chain and possible increase in supply if large numbers are forced to sell

Mortgage Interest rates have lost the link with the BoE base rate. When BoE rates rise, I don't think that the current gap will remain, it's likely to close again as it rises
Remortgages does not affect house prices, its only when property is bought and sold.

orangefender wrote: »

4. as public debt soars and economy gives signs of recovery, fiscal stimulus policies will not be maintained. Considering the level of stimulus we've seen it is not surprising to me that there has been a temporary improvement in the stock market and mortgage lending. The question is where will the money come from when the government is forced to step back.

Banks are raising money from depositors through higher rate fixed deposits. This can then be used to lend out to higher rates i.e. mortgages

orangefender wrote: »

5. it is difficult to envisage a return to the high LTV buy-to-let lending prevalent over the last perhaps 5 - 10 years for a number of reasons i.e. fewer buyers.

There are already 90% products out there.
There are even 95% and 100% products for existing borrowers
http://www.money.co.uk/mortgages/95-mortgages.htm

orangefender wrote: »

6. confidence will not return for sometime such that we will all be wanting to dash out and buy second homes in some sleepy village in the sticks i.e. so less of us terrorising the locals with our Land Rover Sports full to capacity with the nice things we picked up from Waitrose on the way up from the South East.

Confidence has already returned as seen by the increasing sales and increasing prices.
Agreed, there is less demand for all properties, compensated by low supply

orangefender wrote: »

What I do think is that the bottom run of the ladder must come down so that is within reach of those in full time employment under the age of 30. With such a high proportion of that part of the population out of work and with a return to sensible lending criteria, I don't think current prices are sustainable. In the absence of a return to the banks throwing money at people with a complete disregard for the ability of people to repay, there is little rationale for prices to rise above inflation for some time.

Owner occupancy is already 70%+, therefore you'd be looking for this percentage to increase, possible, if prices were lower but does it have to?
At the end of the day the market sets the rates and it will depend on supply and demand.

IveSeenTheLight

the_ash_and_the_oak wrote: »

if 7 people out of 10 with a pound each buy a £1 trinket then 70% can afford trinkets. if prices rise to £10 then can 70% of them still afford trinkets?

Poor anology.
In your example 100% can afford the £1 trinket. They all have £1. Only that 70& of the choose to buy

mewbie_2

Looks like they are going to return to falling quite soon, with the layoffs, cuts and tax problems. Going to play havoc with my portfolio.

IveSeenTheLight

mewbie wrote: »

Looks like they are going to return to falling quite soon, with the layoffs, cuts and tax problems. Going to play havoc with my portfolio.

We all believe it will fall shortly over the winter months.
I don;t think this will be because of lay offs, cuts and tax problems, albeit you may try to claim this is the reason

the_ash_and_the_oak

chucky wrote: »

no because - if you buy in 2003 the property it is bought at 2003 prices.
you will be or should be paying your mortgage at 2003 house prices.

your salary will be a 2009 salary which should be higher than it was in 2003 so all in all it should be much more affordable than it was then.

over-payments (if possible) would make your mortgage cheaper too.

your selling-to-each other is the key here - hence the concept of getting on the property ladder.

But this means that 70% of population can afford their current mortgage levels not current prices. if prices went up 1000% tomorrow, those people would still be able to afford the house they bought (even if it now cost 2.6 million)

agree w the concept of the ladder in principle, but in this example they would only be able to sell to each other - not to new people trying to get on the ladder imo

(I mean, I agree about the ladder and all, im just saying that 70% owner occupancy means they can afford the mortgage - this would stay same regardless of price change - as its the mortgage they owe not the new price value)

HAMISH_MCTAVISH

the_ash_and_the_oak wrote: »

But this means that 70% of population can afford their current mortgage levels not current prices. if prices went up 1000% tomorrow, those people would still be able to afford the house they bought (even if it now cost 2.6 million)

agree w the concept of the ladder in principle, but in this example they would only be able to sell to each other - not to new people trying to get on the ladder imo

Property is not so much a ladder, but a ferris wheel.

People get on, rise to the top, come back down, and get off.

---

(Ftb)----(Family house)----(downsize)

---

(die)----

Money tied up in property does eventually recycle back into the economy, and will continue to do so as long as death is still a constant.;)

the_ash_and_the_oak

IveSeenTheLight wrote: »

Poor anology.
In your example 100% can afford the £1 trinket. They all have £1. Only that 70& of the choose to buy

poorly worded, sorry about that. means to say 7 out of 10 people have a pound (which they then spend on a trinket)