First-time Buyer fear - Will house prices crash??

desperadoV2

I'm a first-time buyer. I'm planning to borrow £160K on mortgages after my debt is closed.

My major fear is House price crash!! If I buy a house for 168K and if the interest rates goes upto 6-7% this year. Will the house price crash?

I hope it doesn't. If it does, how much my property will be worth (appx. figure). I know its hard to predict these things but I'm really worried the way the house price rise are going. At some point surely it has to stop. It cannot keep on increasing can it?

BarmyBubba

If you are looking at staying in the house long term then dont worry too much. If its just a house to get you on the ladder before moving on to bigger and better in a few years then you might be right to worry.

But sod it. Just do it, I am. Its all a risk and very easy to look back and talk about hindsight.

F_T_Buyer

You're right. At some point it will stop rising. Then what will happen to all those people who are investing because it goes up in value.

I can't believe how similar to the 90s this is.

RHemmings

It depends a lot on where you are in the country. In some parts of the country the population is rising, which equates to higher demand for property. In other parts of the country, the population is rising. If you're in a part of the country where population isn't rising, local wages are low and aren't rising, and where rental yields are low, then you're probably in the midst of a speculative bubble that can go pop. And if like me you're in a part of the country with sub-5% yields, a static population, and considerable amounts of newbuild properties being built, then you should hide under a table with your arms wrapped around your head.

A good rule of thumb is to look at rental yields. A sensible landlord will expect 8% return from property. Have a look at some properties for sale and rent, and work out what the return would be on a typical property. If this is less than 8% then landlords have been under-pricing risk and/or relying on house price inflation. Both of the latter are danger signs of a speculative bubble.

RHemmings

BarmyBubba wrote:

If you are looking at staying in the house long term then dont worry too much. If its just a house to get you on the ladder before moving on to bigger and better in a few years then you might be right to worry.

But sod it. Just do it, I am. Its all a risk and very easy to look back and talk about hindsight.

This depends on individual circumstances. If someone has a family and only a moderate income then they have to consider the loss of quality of life because of a crippling mortgage. Waiting a year could be the difference between having to buy in a sink estate with atrocious local schools and be unable to afford private schooling for ones children, and being able to buy near better schools and/or afford private tutoring. Given that most people have deposits, a certain %age fall in house prices equates to a larger fall in the %age of the size of the mortgage needed.

Sarahpuggy

Yep we are going for it too!

I think its scarey as hell but renting is doing my head in @ £700 a month!

dougk_2

F_T_Buyer wrote:

You're right. At some point it will stop rising. Then what will happen to all those people who are investing because it goes up in value.

I can't believe how similar to the 90s this is.

I can't believe how similar this forum is to how it was exactly two years ago with lots of people stating that there would be a crash of 30-40% within 3-6 months - it never actually happened then so why is it going to happen in the next 6 months or 2 years?????

At present (certainly in the South and East) demnand for housing is high with supply outstripping demand, so I believe we will certainly have a stable or rising house market until this changes which will be in several years time even if this government gets its own way over it's plans for hundreds of new houses.

RHemmings

dougk wrote:

I can't believe how similar this forum is to how it was exactly two years ago with lots of people stating that there would be a crash of 30-40% within 3-6 months - it never actually happened then so why is it going to happen in the next 6 months or 2 years?????

At present (certainly in the South and East) demnand for housing is high with supply outstripping demand, so I believe we will certainly have a stable or rising house market until this changes which will be in several years time even if this government gets its own way over it's plans for hundreds of new houses.

The reason why people were predicting a crash was because property was over-valued by most measures. The over-valuation and affordability problems of property have not gone away, but have gotten worse. So why should the prospect of a crash have receded? The problem is that property is now a speculative market, and speculative markets are impossible to predict. Look at the tech shares boom, which everyone would now agree was a bubble. It wasn't a straight rise, top, and fall. Prices went all over the place, crashed, recovered, did all sorts of strange things. Same for property. Except that we don't know where we are.

In saying whether demand will support high prices in the South, you need to know exactly what amount of the rise in property prices is due to population demand, and what amount is due to speculative demand. The former is a more stable effect, the latter can disappear overnight. That's why I prefer to restrict my predictions to places where the population is static or falling.

F_T_Buyer

dougk wrote:

I can't believe how similar this forum is to how it was exactly two years ago with lots of people stating that there would be a crash of 30-40% within 3-6 months - it never actually happened then so why is it going to happen in the next 6 months or 2 years?????

At present (certainly in the South and East) demnand for housing is high with supply outstripping demand, so I believe we will certainly have a stable or rising house market until this changes which will be in several years time even if this government gets its own way over it's plans for hundreds of new houses.

Yes, there was. I put them in the group who called the dot com bubble peak two years early too. There analysis was spot on, they just underestimated people's stupidity.

I don't know if you have noticed, but inflation is on a definate upward path. I've been saying this would happen for a over a year now. At some point interest rates will have to rise to combat it, then what are all these people who've borrowed too much going to do? Who's going to be buying the first rung properties when prices stop rising? FTBers? They account for around 10%, there is not enough of them. Prices will just fall until they can afford.

Your attitude is that if it hasn't happened, it won't happen.

Look what's happening in the US now. It makes me laugh how the UK media report on it, but for £150k (which would be a flat I you could get here) you could afford a mansion with swimming pool in the US. Yet, seems impossible for prices to fall here.

I think the OP, and any reader here, should do what they think is best for them. There is enough warnings (so much so the media hardly report them), just don't come crying when you didn't expect rates to rise that much. But I dare say they will, just like all the people in massive debt on this forum, and the people complaining about the last rate rise.

dougk_2

The inflation is mainly due to higher fuel costs - which have now dropped again in the last week or so. I look forward to lower inflation in this next months figures. Remember fuel prices effect everything as transport costs increase.

The US is not the UK and a larger percent rent in the US rather than buy (and if you ask many americans they would rather rent as it fits their lifestyle). Also houses in US (and in many other areas of the world incl. Europe) are built differently and are untied to the thousands of UK regulations and planning restrictions. The US don't seem to mind destroying everything in for an individuals personal gain. Also they are being hit much harder than us by rising fuel costs (using somewhat inefficient vehicles).

I remember reading a couple of weeks ago that the most expensive place to live is Moscow , now most people would not expect that would they?

My attitude isn't that it hasn't happen so it won't - more so change the broken record no-one actually knows!

I do agree people should do what they think is best, and that at the best we can only really guess what will happen to inflation, house prices and the future.

Dan29

desperadoV2 wrote:

I'm a first-time buyer. I'm planning to borrow £160K on mortgages after my debt is closed.

My major fear is House price crash!! If I buy a house for 168K and if the interest rates goes upto 6-7% this year. Will the house price crash?

I hope it doesn't. If it does, how much my property will be worth (appx. figure). I know its hard to predict these things but I'm really worried the way the house price rise are going. At some point surely it has to stop. It cannot keep on increasing can it?

If things are as bad as some people on here say, you'll probably have your answer by March when you're debt-free (although won't you still have to save up a deposit?).

No one can tell you whether or when a crash will happen, or how much your house will be worth afterwards, but bear in mind that if you put down a 5% deposit then obviously a 5% drop in prices will leave you in negative equity. If you're planning to stay in the house for ten years this may not be a problem, but can you explain why you want to buy a house now? Are you not keen on renting? Would your mortgage be less each month than renting? And how much could you afford rates to rise before you struggled to pay the mortgage each month?