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

Dan29

desperadoV2 wrote:

That is my big fear!!! I don't know my luck. I had a oppurtunity to jump on property market by early 2002 and again in 2004 but I didn't. I'm still in the same dilema!!

I think it's fair to say that most people acknowledge that things have changed since 2004. Although some people were saying at that time that prices couldn't keep going up, more people are saying it now. I wouldn't advise any of my friends who are FTBs to buy at the moment. Of course prices may keep going up but it's more of a gamble than it's been for a long time IMHO.

desperadoV2 wrote:

One annoying thing about renting is I'm paying £500/- a month. I have been in this flat for the last 5 years (appx.) so I have paid £30,000/- in rent. The landlord bought this property back in 2000 for £70,000/- You do the math how much money I have lost. I should have a profit of atleast £40,000 - £60,000/- if I jumped the property market in early 2002.

Maybe but whether you'll be better off in 5 years' time if you buy now is another matter. £400 extra a month, plus the extra costs of owning a home rather than renting, is a lot of extra money to find.

desperadoV2 wrote:

I'm really confused!!! I hope there is this magic person who could predict the future and tell me whether I should jump into property ladder now or not.

There are several magic people here who will probably say not. I think very few people will say it's a good idea, although it gets less bad as an idea the longer you'd be planning to stay in your new home. If it's for less than 3 years then I think it could prove a bad idea.

PabloNeruda

desperadoV2 wrote:

That is my big fear!!! I don't know my luck. I had a oppurtunity to jump on property market by early 2002 and again in 2004 but I didn't. I'm still in the same dilema!!

Are you buying a house to make money or to live in?
It's all relative - if prices fall you will get less for your place but you will also be able to buy somewhere else for proportionately less as well. It's all relative.

Just go for it, prices always recover. The longer you leave it, the harder it will be.

RHemmings

Dan29 wrote:

There are several magic people here who will probably say not. I think very few people will say it's a good idea, although it gets less bad as an idea the longer you'd be planning to stay in your new home. If it's for less than 3 years then I think it could prove a bad idea.

Actually, if the prices of houses are likely to crash, which I think they will in some areas, then buying isn't just a bad idea if you're going to be in the house for a short time, but also if you're going to be in it for a long time. Your mortgage isn't going to go down if the value of your house goes down. So you get the worst of both worlds, a cheap house but expensive payments. And this will continue for decades. The difference in money can buy a lot of useful stuff. This morning they're discussing "top-up fees" for the NHS. Will it be the case that in the future having a few thousand disposables could be the difference between life and death for your loved ones. Even now being able to pay for cancer scans without long NHS waits can make that difference.

Whether house prices will crash or not is not absolutely known, but it's something to think about very seriously. The amounts of money involved and the lifetimes of mortgages are not trivial.

RajaStyle

http://www.parkerchris.pwp.blueyonder.co.uk/vocationvocationvocation.html http://www.forbes.com/markets/feeds/afx/2006/08/04/afx2927537.html http://www.housepricecrash.co.uk/

dougk_2

One of the issues that makes it a very individual decision is how good you are at managing money. For instance Buying a house to live in is different to buying a house to invest and profit from.
If as an individual you can live in rented accomodation cheaper and are happy then fine, but iat the same time even though it is "cheaper" what do you do with your spare cash? Does it just "vanish" as you spend it thinking oh its spare, or do you save it.
Many people find that initially they save it then think , oh I could by a new car or oh I can have an expensive holiday so they never actually end up with any savings as its spent.

On the other hand if you buy the house and pay the mortgage every month then at the end you will have something of an asset even if it goes down in price at some points., although it may be a struggle andyou miss out on some "pleasures".

As I say its an individual choice and down to personalities and what they want. There is no right or wrong answer.

Tassotti

"I had a oppurtunity to jump on property market by early 2002 and again in 2004 but I didn't. I'm still in the same dilema!!"

And if you don't buy now, you will be saying the same thing in 2008,2010...etc

However, by then you may not be able to afford to buy a property.

BUY BUY BUY

Don't listen to the doom-mongers

RHemmings

Tassotti wrote:

"I had a oppurtunity to jump on property market by early 2002 and again in 2004 but I didn't. I'm still in the same dilema!!"

And if you don't buy now, you will be saying the same thing in 2008,2010...etc

However, by then you may not be able to afford to buy a property.

BUY BUY BUY

Don't listen to the doom-mongers

And how do you propose that people will be able to buy properties in 2008, 2010, etc. if prices keep on rising above wage inflation?

dougk_2

Quote:
And how do you propose that people will be able to buy properties in 2008, 2010, etc. if prices keep on rising above wage inflation?


Because the banks will increase the amount they lend in multiples I guess.

A guy here at work who is 18 and lives at home on a 7.5K a year salary has just been given his first credit card by American Express with a limit of £10,900...go figure that one out! He doesn't actually know how the interest is charged etc so have given him a lesson today.

RHemmings

dougk wrote:

Quote:
And how do you propose that people will be able to buy properties in 2008, 2010, etc. if prices keep on rising above wage inflation?


Because the banks will increase the amount they lend in multiples I guess.

A guy here at work who is 18 and lives at home on a 7.5K a year salary has just been given his first credit card by American Express with a limit of £10,900...go figure that one out! He doesn't actually know how the interest is charged etc so have given him a lesson today.

But there must come a time when people are unable to afford the repayments. For a lot of people this time is now. Future interest rate rises will also hit affordability, as even small rises on a historically low interest rate hit affordability massively. And particularly with IO mortgages, it's not just whether you can afford the mortgage at the time of purchase (given whatever discounts) but whether you'll be able to afford it through the life of the mortgage, with whatever interest rates we have between now and then. There is alread a worrying trend of bankruptcy and repossession among FTBs on massive multiples. If the multiples get higher then these problems will be exacerbated.

And all this assumes that banks will keep on loosening credit As their losses due to bad debts increase, they will try to claw these back. Even if the debts are sold to third parties, eventually those third parties will start demanding more payment for the risk that they are taking. It just cannot happen that multiples keep on going up and up, a breaking point will be reached.

F_T_Buyer

This is how crashes happen, just look at Tassoti's reply.

How do you propose banks will lend more. Whatever the situation, you have to pay interest. But people are struggling to do that, look at increasing repossesions.

Look how the banks are desperate to lend, look at the income non verified mortgage. Look at the new inter-generational mortgages. Pure madness. There will be a point when the banks lose too much money, then they will tighten credit! A credit crunch will happen.

Did you know £1 in every £5 that Barclaycard lend out is lost as bad debt, just wait until rates go up further. Wait until unemployment increases, or gas bills rise further.

Why don't you listen to the Governer of the Bank of England, who has given warning about over valued property. We are very near end game, and i'm sure more fools will be sucked in who will lose their shirt.

Head in the sand or what.