I Cannot See Value

badrobot76

We are looking to take the next step on the ladder ,we bought our house for 66k back in 04 and hopfully sell for around 90k , during that time I have managed to save hard and get a deposit aroun 30k ,hopfully this will give us around 54k equity on the next house

Despite this the houses we can afford to upgrade to look slightly larger but not that much larger looking at houses between 180-200k will still mean a mortgage of around £800 despite the equity and savings, current mortgage is £460

I simply cannot see the value in some of the houses we see on rightmove etc? Is this unusual?

sss555s

Get out of here!!!

:rollseyes:

badrobot76

why? :eek:

PasturesNew

You bought yours at £66k and it costs you £460. Your buyer will buy it at £90k and their mortgage might be £600/month. Does yours look good value now?

When you buy your first house, especially if it's on 100% mortgage, the item "value" doesn't really enter into the equation. Now you're questioning it because it's YOUR £54k you are putting down - and taking on a bigger risk/mortgage, costing you a lot more. So your viewpoint has changed since 2004, as well as prices. Now it's your money it's scarier, so you start to question more.

badrobot76

Thanks PN I guess also when i look around at value i see a lot of houses way overvalued for only a modest step up in size despite the deposit i have etc and some are still out of reach i.e out of line with average earnings multiples , i feel as many others must that property is way overvalued against our salaries and despite saving so hard over the last few years it still seems to make so little impact , the need to move is a family one(2 kids that were not arround in 04) and not an investment one.

HAMISH_MCTAVISH

badrobot76 wrote: »

i feel as many others must that property is way overvalued against our salaries and despite saving so hard over the last few years it still seems to make so little impact , .

I'm quite sure that people in the 1970's felt the same way about houses priced at £3000, versus the £2500 they thought it should be worth.

Of course now, people know such temporary differences are immaterial in the long term, and laugh at the wholly trivial concept of a £500 difference in house prices being of any importance whatsoever.

Wait.....

You do know such temporary differences are immaterial in the long term, don't you?:eek:

treliac

badrobot76 wrote: »

Thanks PN I guess also when i look around at value i see a lot of houses way overvalued for only a modest step up in size despite the deposit i have etc and some are still out of reach i.e out of line with average earnings multiples , i feel as many others must that property is way overvalued against our salaries and despite saving so hard over the last few years it still seems to make so little impact , the need to move is a family one(2 kids that were not arround in 04) and not an investment one.

Maybe better to wait awhile and see what happens to prices after the election, if you can. You are doing very well to have started a family and still to be able to save. The more you put away, the better position you will be in when you do buy.

As prices drop (if, like me, you think they will), the margin between cheaper and more expensive houses will start to close as well. Making it easier to go for that next step up.

badrobot76

HAMISH_MCTAVISH wrote: »

I'm quite sure that people in the 1970's felt the same way about houses priced at £3000, versus the £2500 they thought it should be worth.

Good point although the 70's and early 80's were very different times , inflation increases had a major impact on this as opposed to increases in real earnings maybe that is where we are heading again - who knows, perhaps inflation increase is the only answer to bring house prices back in line and level off again with average earnings?

HAMISH_MCTAVISH

badrobot76 wrote: »

Good point although the 70's and early 80's were very different times , inflation increases had a major impact on this as opposed to increases in real earnings maybe that is where we are heading again -

Inflation 3.5% (CPI)...... House Price Inflation 5.5%.....(Nationwide)

You do the maths.....

who knows, perhaps inflation increase is the only answer to bring house prices back in line and level off again with average earnings?

House prices are almost exactly in line with long term trend. (inflation plus 2.9%)

House prices are also well below long run average in terms of percentage of disposable income used to service mortgage payments, at 31% versus the long term average of 38%, and a peak of 68% in 1990.

On only one measure, income multiples, are house prices above the 50 year trend, (but probably below the real long term trend), however at only 4.5 times full time male mean income versus an average of 4 times male mean full time income, they are not much above it. And given that average is subject to moving with external influences, such as more women working and therefore dual income couples buying, and housing shortages, it is extremely speculative to assume that average will hold true for the long term.....

LydiaJ

Hamish, you talk as though you expect HPI to continue at a long term trend of inflation +2.9% for ever. Unless you expect wage inflation also to be CPI + 2.9% then houses would go on indefinitely becoming more expensive compared with wages. Eventually that would result in the price of even the cheapest house being beyond the life time earnings of the very richest people. Either that, or else the trend won't go on for ever. I know which I find more believable.

Before any of the bulls start shooting me down, I'll just make it clear I am not trying to make any predictions about what HP will do in the short or medium term. I'm quite happy to admit I haven't got a clue about that.

HAMISH_MCTAVISH

LydiaJ wrote: »

Hamish, you talk as though you expect HPI to continue at a long term trend of inflation +2.9% for ever. Unless you expect wage inflation also to be CPI + 2.9% then houses would go on indefinitely becoming more expensive compared with wages. Eventually that would result in the price of even the cheapest house being beyond the life time earnings of the very richest people. Either that, or else the trend won't go on for ever. I know which I find more believable.
.

Of course the trend will not go on forever.

As soon as renting for a lifetime becomes cheaper than buying, people won't buy.

But buying today is still only around 30% of the costs of renting for an adult lifetime...... So we have a long way to go yet.

Not to mention that with the current imbalance between supply and demand, only the top earning 30% of households need to be able to afford to buy for house prices to keep rising, versus the 70% of owner occupiers today, it is clear to even the most simple of people that prices will at least double in real terms, perhaps triple, before any real affordability constraints come into play.

House prices will eventually stop rising, as eventually population will stop growing and housebuilding will catch up. The trees do not grow to the sky, as they say.

But barring nuclear war, or an outbreak of plague, this will not happen in our generations lifetime for sure, and probably not in our childrens lifetime either.