Bulls and Bears don't exist

IveSeenTheLight

the_ash_and_the_oak wrote: »

Definitely agree with this (re:long term) tho imo you should really consider your position over the likely timeframe of owning the property before trading up/moving on etc. Eg buying a flat not really feeling living in it for 25 years so the rises of 25 years inc the ones after its sold not really applicable imo. Maybe around 5 is what I'd pencil in. Should be bullish or bearish based on the estimated timeframe of owning before selling (which is of course different depending on personal scenario)

We bought a flat in 2000 and moved to our house in 2004
In that time we made a nice little profit which went towards reducing the mortgage of the house.
Some of the profit was from HPI and some of it because we renovated the property.

If house prices rise, by owning you mitigate some of that rise as your property has also in effect gained from the HPI.

If house prices are stagnant, then it comes down to the rent v's mortgage interest debate (ignoring the benefits of home ownership)

If house prices drop, then as people say on here, the property you are moving up to has also reduced thus you would be buying for less (probably saving more than any negative equity you may have to pay)

Given we have seen on average properties drop by 20% similar to the last correction in the 90's and that on average they are rising again this year, if you were a gambling man, where do you think prices will be in 5 years time from now? Higher or lower?

IveSeenTheLight

the_ash_and_the_oak wrote: »

I haven't but surely a most first time purchases don't take place over 25 years? Don't a lot of people sell and rebuy after more like 4-8 years?

see the post above, covers I bought and sold after 4 years and looking forward to the next 5 years

the_ash_and_the_oak

IveSeenTheLight wrote: »

see the post above, covers I bought and sold after 4 years and looking forward to the next 5 years

So although you bought in 2000 it was the rises between 2000 and 2004 that you benefited from? rather than any rises that place may have between 2004 and 2025?

What I'm trying to get at here is that imo its the rises and falls for the period of ownership that matter not for the full 25 years

I totally agree that if you own for 4 years and then sell, and prices rise in that time period then you have done well. But if prices fall or remain stagnant during those 4 years then imo any rises over the next x years you don't benefit from.

Or to put it another way. If you bought in 1990 and sold in 2015 you have done very well - but if you bought in 1990 and sold in 1994 then you have not benefited from the next 21 years rises (I'm aware that if you sold in 1994 and bought again you would then benefit from the rises 1994-2015 - but so would someone who was an ftb in 1994).

IveSeenTheLight

the_ash_and_the_oak wrote: »

What I'm trying to get at here is that imo its the rises and falls for the period of ownership that matter not for the full 25 years

I accept that.

If prices rise and you own you mitigate the larger prices rises
If prices don't rise it's down to the rent v's mortgage interest discussion.
If prices fall, then you benefit from the larger property also reducing in price, although you would granted benefit slightly more by renting if you had not lost the reduction in your current house.

For me, it's safer to own property as you will still be able to afford if they get cheaper, but are mitigating rises which could put ownership out of affordability if they rise

Now you are looking at properties in London, so I re-itterate my question: -
Given we have seen on average properties drop by 20% similar to the last correction in the 90's and that on average they are rising again this year, if you were a gambling man, where do you think prices will be in 5 years time from now? Higher or lower?

You are free to tailor to your specific vested interest area should you wish.

the_ash_and_the_oak

IveSeenTheLight wrote: »

If house prices drop, then as people say on here, the property you are moving up to has also reduced thus you would be buying for less (probably saving more than any negative equity you may have to pay)

Don't get this. If you buy for say 100 (with 10% deposit) in Y1...and then in Y5 sell for 85 and rebuy for 130 then how have you done better than someone who rents and sticks their 10% in the bank until Y5 and then buys for 130?

and from Y5 don't both benefit from rises Y5-Y25?

Given we have seen on average properties drop by 20% similar to the last correction in the 90's and that on average they are rising again this year, if you were a gambling man, where do you think prices will be in 5 years time from now? Higher or lower?

I am a gambling man! I'm gambling by not buying a 1bed flat! I'm not sure whether they'll be lower, similar or higher. I'd need them to be higher than they are now by enough to mitigate the buy/sell costs, extra monthly cost and risk to my capital. Can't really see that tbh (I'm bearish over that timeframe - especially re:flats - tho yes in 20 years they'll prob be masses higher than today sure!)

the_ash_and_the_oak

IveSeenTheLight wrote: »

You are free to tailor to your specific vested interest area should you wish.

My interest isn't vested! I'm just a person. I don't go on tv or write press releases or act as an advisor to anyone!

MiserlyMartin

IveSeenTheLight wrote: »

Given we have seen on average properties drop by 20% similar to the last correction in the 90's and that on average they are rising again this year, if you were a gambling man, where do you think prices will be in 5 years time from now? Higher or lower?

You are free to tailor to your specific vested interest area should you wish.

I don't think there is any gambling about it. House prices are still far too high by historical standards. The only way is down. Interest rates: the only way is up! It might take 2 years, 5 or even 10 to correct properly and you have to consider prices in real terms adjusted for inflation.

IveSeenTheLight

the_ash_and_the_oak wrote: »

Don't get this. If you buy for say 100 (with 10% deposit) and in Y1 sell for 85 and rebuy for 130 in Y5 then how have you done better than someone who rents and sticks their 10% in the bank until Y5 and then buys for 130?

and from Y5 don't both benefit from rises Y5-Y25?

There are not many people that STR as in your case of buying ans selling the same property.
If they time it perfectly then they can win, often they don;t time it so well.

Better example is buy for £100k with 10% deposit.
Lets say prices drop 20%, so the property is now only worth £80k
You've borrowed £90k and repaid £8,500 in capital
so in effect are in NE by £1,500.
The property you want to buy was £200k, but has also dropped 20% so is now £160k.
Granted the renter is better off as they are not in NE for £1,500 and have not lost their £10k deposit (or interest over the 5 years)
So roughly £14k better off, if prices drop 20%

If prices stay the same, then the owner has £18,500 in equity, while the renter has only the initials deposit plus interest, roughly £12,500.
Therefore if prices are the same, the owner is better off

If prices rise 20%, the new property is now £240k.
The owner has £38,500 in equity, the renter still only has the £12,500
The £38,500 goes much better towards the deposit than the £12,500
The owner is better off

In short, as an owner, you are still likely to be able to afford the bigger propertys if prices fall.
As a renter, you may not be able to afford the bigger property if prices rise.

In my opinion you are reducing the risk of being able to buy the larger property by owning a smaller property instead of renting.

StevieJ

MiserlyMartin wrote: »

I don't think there is any gambling about it. House prices are still far too high by historical standards. The only way is down. Interest rates: the only way is up! It might take 2 years, 5 or even 10 to correct properly and you have to consider prices in real terms adjusted for inflation.

http://www.youtube.com/watch?v=gAdTsAKvVTU

the_ash_and_the_oak

my post wasn't clear - there is no STR ing!

it should say

Y1: buy 100
Y5: sell 85 buy 130

i'll edit it (for later readers) - then read rest of your post