Likely effect of the stamp duty elimination on house prices

doire_2

Quick rush out and buy that overpriced house valued at £200,000 now that we can save £2,000 on it. Who cares if we are saddled with a huge debt for the rest of our lives...we have saved £2,000 :T

The Nationwide said it would save £1,368 for the average first-time buyer, but Mr Gahbauer was unsure if it would made much difference to the market as a whole.
"Over the course of the last [stamp duty] holiday, there was indeed a modest increase in house purchase transactions, with most of the pick-up seen during the second half of the exemption period," he said.
"However, transactions remained well below normal levels throughout and it is not clear how much of the pickup was attributable to other factors such as the record cut in interest rates.
"In addition, there was no appreciable increase in transactions at the lower end of the chain," he pointed out.

Linton

To connect two separate threads......

I believe the increasing gap between rich and poor is one of the causes of house price inflation for the first time buyer.....

1) As the rich get richer, they want bigger and better houses to advertise their improved status and are able to pay for them.

2) There is inflation in the cost of large houses

3) Builders with a fixed amount of land get more profit from a smaller number of large houses than a large number of starter homes.

4) Fewer cheap homes are built.

5) Cheap desirable houses become relatively scarcer and therefore more expensive

I see circumstantial evidence for this in that new small estates tend to be of 4 bedroom "executive" houses. Starter homes seem to be mainly built when the planning authorities insist.

System

re: the 20k extra thing
It's not about the maximum amount the banks will lend, it's about the maximum the person can get whilst still remaining under 90% LTV.

DaddyBear

Linton wrote: »

To connect two separate threads......

I believe the increasing gap between rich and poor is one of the causes of house price inflation for the first time buyer.....

1) As the rich get richer, they want bigger and better houses to advertise their improved status and are able to pay for them.

2) There is inflation in the cost of large houses

3) Builders with a fixed amount of land get more profit from a smaller number of large houses than a large number of starter homes.

4) Fewer cheap homes are built.

5) Cheap desirable houses become relatively scarcer and therefore more expensive

I see circumstantial evidence for this in that new small estates tend to be of 4 bedroom "executive" houses. Starter homes seem to be mainly built when the planning authorities insist.

It's a very good point. However, the number of people who can afford these executive homes is getting less each year. Something has to give soon.

DaddyBear

ukcarper wrote: »

I'm surprised that the vast majority of FTB are being bank rolled by the bank of mum and dad because I don’t know any mind you I don’t move in the circles where the parent could afford to give their children £20k. But then how many real FTB are there in the market. Does Rich exceed Bank of mum and dad.

Believe me, this is the case.
I'm in my early thirties and most of my friends still rent. Of those that have bought, around 90% have been with gifted deposits from BOMAD.
Before the last 5 years the main determinant of the house you could afford was your earnings, now it is the wealth of your parents. Labour blabs on about social mobility but house prices are a massive barrier to social mobility.

It's no surprise that more young people are chosing not to work. Where is the motivation? If they worked they could probably afford to rent the same sort of house that social services would provide. There is no point and this country is being dragged down because of it.

Linton

DaddyBear wrote: »

Believe me, this is the case.
I'm in my early thirties and most of my friends still rent. Of those that have bought, around 90% have been with gifted deposits from BOMAD.
Before the last 5 years the main determinant of the house you could afford was your earnings, now it is the wealth of your parents. Labour blabs on about social mobility but house prices are a massive barrier to social mobility.

It's no surprise that more young people are chosing not to work. Where is the motivation? If they worked they could probably afford to rent the same sort of house that social services would provide. There is no point and this country is being dragged down because of it.

I think this is overstating the problem. As you say, BOMAD are funding the deposit because deposits are high. Deposits are high because interest rates are the lowest they have ever been. This means that the lenders cannot cover their risks (which must have been increased by the credit crunch) by interest and so need to find other ways.

Assuming interest rates rise at some stage deposits will fall, and so the ability of first time buyers to buy a house will move more to their ability to pay the mortgage. So I suggest this particular problem is temporary - BOMAD wont want to pay the mortgage.

If you believe in supply and demand rather than hypothetical mathematical calculations with %'s I believe you will come to the following conclusions...

What isnt temporary is that starter houses will always cost only marginally below what the buyers can possibly afford - either by pure price inflation or by inflation in what is the minimum socially acceptable starter home. So that those potential buyers who in the past have been led to believe they can have everything now will be sadly disappointed as will the bears who are waiting for a massive drop in prices.

The people who win out are those who have always won out in the housing market - those who scrimp and save in the early days to buy something very basic.

If as DaddyBear says many young people are choosing not to work, that will in a sense solve the HPI problem. Those people are destined for a life of penury, the remaining will be able to get buy increasingly luxurious starter homes.

ukcarper

The market is very slow at the moment and the fact that very few FTBs do not have a deposit might be that prior to the crash you didn’t need one. . I can’t see how it is impossible to save for a deposit now because prior to the start of 100% mortgages people did. It must be easier to save a deposit in a falling or stagnating market then in a rising one so perhaps in a year or two FTBs will have saved enough to buy.

doire_2

ukcarper wrote: »

The market is very slow at the moment and the fact that very few FTBs do not have a deposit might be that prior to the crash you didn’t need one. . I can’t see how it is impossible to save for a deposit now because prior to the start of 100% mortgages people did. It must be easier to save a deposit in a falling or stagnating market then in a rising one so perhaps in a year or two FTBs will have saved enough to buy.

Particularly when house prices have fallen Will the banks lend though?

Harry_Powell

I love watching Graham Devon work, he ties the bulls in knots as they try and try to explain a concept to him that he already obviously understands but pretends he doesn't just to wind them up.

It amazes me that so many posters continue to fall for it. I saw through it months ago when I came to the conclusion that no one could be as dense as Graham pretends to be, so it had to be a gag. It's like a magician's trick, once you see through it, it's obvious. Graham is a genius, pure and simple.

DaddyBear

Linton wrote: »

I think this is overstating the problem. As you say, BOMAD are funding the deposit because deposits are high. Deposits are high because interest rates are the lowest they have ever been. This means that the lenders cannot cover their risks (which must have been increased by the credit crunch) by interest and so need to find other ways.

That's not the case looking at my friends. Parents are gifting "deposits" because their offspring cannot afford mortgages on anything bigger than a shed. In other words they are giving out upto 50% (2 of my friends have received 50% from parents) because junior cannot physically pay the mortgage on an average house.