Why now so hard to get that 1st rung on the propery ladder compared to years gone by?

Dan29

wibble68 wrote:

Yes I agree some people can make money by moving to a different area or continually doing work to their house and moving on.

The real winners are the government though.

Yes and it'll be interesting to see what happens now that stamp duty becomes such a big factor in people's decision whether to move or not, as it applies to so many more transactions than it used to, and the effect of it is no longer masked by the "profit" people feel they've made in a rapidly rising market.

What will the government do to make sure the revenue gained doesn't diminish if people move house less often?

PoorDave

BobProperty wrote:

Because it does. Because that's the market. Because that's what happens. People try and explain it lots of ways (Kondratieff ? wave theory is one) but it happens. You can't change it so you have to live with it, at least in most countries on the planet. That's why I think the most dangerous phrase in investing is "It's different this time".

My question was how these TV programs "caused" it, when they seemed to benefit from it happening in the background.

I suppose it's to do with all the people who watched the previous series of [insert program title] who then go and get cheap credit to be doing "what the people on TV are doing"

My feeling is that in order to be making the same money as they did when interest rates were high (otherwise shareholders start wondering what's going on with the lender they own shares in), lender have to lend more than they used to (5x salary vs 3x or 3.5x) at the lower rate.

As with most of my posts, the above could be nonsense...

Jim_B_3

Dan29 wrote:

What will the government do to make sure the revenue gained doesn't diminish if people move house less often?

People will spend it elsewhere on stuff that is taxed at 17.5%

PoorDave

Jim_B wrote:

People will spend it elsewhere on stuff that is taxed at 17.5%

Something involving their usual lack of caring whether we're all happy or not? Unless there's an election at the time obviously, then it will be the same as a bove with more smokescreen

Jim_B_3

PoorDave wrote:

Something involving their usual lack of caring whether we're all happy or not?

Everything that isn't (most) food, public transport, children’s clothes, books and newspapers. VAT.

Iso

PoorDave wrote:

My question was how these TV programs "caused" it, when they seemed to benefit from it happening in the background.

I suppose it's to do with all the people who watched the previous series of [insert program title] who then go and get cheap credit to be doing "what the people on TV are doing"

They help to fuel the boom. These TV programmes never take into account the fact that the property market has risen. They never include the expenses that will have to be paid by the "developer" when he sells the property. They get two or three agents round to value the place and then say "so the property is now worth (the average valuation) which means that (after three to six months of hard labour, bank overdraft at peak, credit cards up to the hilt etc etc) joe bloggs is going to make x amount of money."

No, that doesn't mean he's going to make x amount of money. He hasn't sold it yet and when he does sell it he's got to pay loads of fees plus he should calculate how much he has lost in earnings (most have given up their highly paid jobs) and they'd find that they had, in fact made a loss.

What I meant was, it looks good on TV, most people don't question it; in fact loads of people assume because the market has been going up for the last 10 years or so that it will continue to go up and never drop. Many people assume that because interest rates are low and have been low for years that they will stay low.

The media is helping to create a "feeding frenzy". This is fuelled by the "tv show type developers" hoping to get rich quick (see above), second home owners and BTLs.

Dan29

Iso wrote:

They help to fuel the boom. These TV programmes never take into account the fact that the property market has risen.

I think that's a bit unfair. Property Ladder is the only one I watch, and Sarah Beeny regularly says things like "You've made £70,000 but if you'd done nothing, the rising market means you would have made £100,000" - happened a couple of weeks ago in fact.

Iso wrote:

The media is helping to create a "feeding frenzy". This is fuelled by the "tv show type developers" hoping to get rich quick (see above), second home owners and BTLs.

Well if prices stop going up, I'm sure all these people will suffer so that's something for you to look forward to

Iso

Dan29 wrote:

I think that's a bit unfair. Property Ladder is the only one I watch, and Sarah Beeny regularly says things like "You've made £70,000 but if you'd done nothing, the rising market means you would have made £100,000" - happened a couple of weeks ago in fact.

If they do that's great - never heard it myself. Do they take into account loss of earning though? The "developer" has usually given up a well paid job and this should be factored in.

Dan29 wrote:

Well if prices stop going up, I'm sure all these people will suffer so that's something for you to look forward to

Why should I look forward to it? The thread is "Why is it so hard to get on the property ladder..." and I'm trying to help answer that.

These property programmes don't help because they don't factor in all the costs and there are loads of people out there trying their hands at "developing" because the programmes seem to make out that it's a fairly easy way to make money - and is is relatively easy to make money in this climate but the moment interest rates start to increase or the property market falls these "tv developers" won't stand a chance.

Then there are the BTL merchants. They can afford to do this because interest rates are lower than the rents they achieve. If interest rates go up the rental income won't cover the mortage payments so loads of BTLs will go on the market.

There are, of course, loads of other factors. Lenders giving 5 x salary for example. If they had stuck to 3 x salary I expect that the boom wouldn't have been quite so steep.

Where I live a few years ago a small cottage cost max £50K and the average wage was £8K - £10K. Assuming a loan of 3 x salary and both partners earning (let's be conservative) £8K - 3 x £8K = £24K x 2 = £48K = enough to buy the £50K property (assuming 10% deposit) and pay the fees, stamp duty etc relating to the purchase.

Now that same cottage costs in excess of £200K and the average wage is £10K - £15K. Assuming a loan of 5 x salary and both partners earning (let's go for the higher salary this time) £15K - 5 x £15K = £75K x 2 = £150K = not enough to buy a £200K property - even assuming 10% deposit (£20K) there's a shortfall of £30K and that's before factoring in the fees, stamp duty etc.

What will happen if interest rates go up by 2% or even 3%? Loads of people are stretched to the hilt as it is. My bank manager recently told me that loads of the bank's clients were taking out loans to pay for the lifestyle they thought they should be able to live! Is that sustainable?

I frequently hear people boasting that their property has gone up by such and such a percent. So what? So have all the other properties around them; it's all relative. They will all go up and they will all come down. The only people this really affects are those trying to get on the property ladder - because it'll be easier for them when prices come down - which they will. It's just a question of when.

danrees

I am looking to buy my first property in the near future. I am currently renting with my girlfriend in London paying £1000 per month for a fair-sized one bedroom flat.

The most frustrating thing that I have found in assessing the market is that the vast majority of properties are already developed. You watch these TV programmes discussed above and think that all you need to do is find a flat or house requiring work to be completed, and you will get a decent flat at a reasonable price.

The reality is that any development in any reasonable area in London has already happened. First time buyers now are being squeezed out by those private individuals who have already seen the value in refurbishing before sale, and Buy-to-letters.

Buying a first flat (one bedroom flat at that) in London is either incredibly expensive or very risky. God knows how the property prices have increased in the East End by so much since the Olympics was announced - this has got to be the biggest bubble for a long time.

lynzpower

Danrees,

I have to disagree with you there really, theres plenty under the 150 mark, especially in east london. But then I wonder what you mean "reasonable area"??