utterly disillusioned

gingin_2

We are off to Sydney in 18 months time, the market there has been falling for 3 years now, first very slowly but has finally picked up momentum and in my opinion is now in freefall (prices fallen by 18% since 2003 in our preferred area). Interest rates have risen to 6% and set to rise further (sound familiar?).

Being the same age as you Georgy9 I don't remember the last crash in the U.K, this one in Oz makes for very interesting watching and they say the U.K is 3 years behind Sydney.

The husband works for a large bank and the opinion there is that we are on the edge of a recession with a further interest rate rise this year and perhaps we might be a 1% higher by next year. Hold tight and in a few years time I think it will be a very similar picture.

al_yrpal

What lots of people here are forgetting is that the one and only house price crash we have had since WWII was accompanied by mass unemployment. It went up to about 4 million if my memory serves me right. In that situation VERY FEW people were selling houses and very very few were buying (which is why prices slumped). There was a serious lack of confidence about. If anyone thinks that in that situation they will be brave enough to buy whilst fearing for their job, they had better think again.
We are in a new situation now. We have a growing population, and planning restrictions which are stifling the supply of new houses. Parents are chipping in to help their kids get a foot on the ladder and people are obsessed with property spawning wouldbe BTLers and second home owners. All this has driven up prices. I think there is a limit and prices will stabilise. Whilst there is full employment, or even a small recession I don't think it will have a substantial effect on prices.
No-one would in his/her right would mind wish a full scale recession on us all - it won't do anyone any good at all.

movieman

If anyone thinks that in that situation they will be brave enough to buy whilst fearing for their job, they had better think again.

Nonsense. I know plenty of people who bought houses in the last crash... few, if any, of them could afford to buy the same houses today. I'd say it's a fairly clear sign of a bubble if the average person could no longer afford to buy the house they're living in.

We are in a new situation now.

That's what they always say at the peak of a bubble. Then a few years later we find those quotes on the web and laugh, wondering how anyone could have believed it.

No-one would in his/her right mind wish a full scale recession on us all - it won't do any one any good at all.

Recessions are an essential part of the economic cycle to clear out imbalances that occured in the previous boom: attempting to prevent them merely insures that the imbalances become even worse until when a crash does happen, it's a full-on depression instead of a short recession.

PropertyGuru

realwildone wrote:

I find comments like this insulting..

yes, it's probably a recipe for disaster. If you can only afford to get on the ladder by 'bunking up' with friends, you probably shouldn't be tryin in the first place.

Same goes for your spouse. If you need both incomes, what happens when you want children?

al_yrpal

movieman wrote:

Nonsense. I know plenty of people who bought houses in the last crash... few, if any, of them could afford to buy the same houses today. I'd say it's a fairly clear sign of a bubble if the average person could no longer afford to buy the house they're living in.



That's what they always say at the peak of a bubble. Then a few years later we find those quotes on the web and laugh, wondering how anyone could have believed it.



Recessions are an essential part of the economic cycle to clear out imbalances that occured in the previous boom: attempting to prevent them merely insures that the imbalances become even worse until when a crash does happen, it's a full-on depression instead of a short recession.

All that still doesn't explain how someone who hasn't yet been able to afford their own house is going to almost uniquely be in a sound position to buy one in a full scale recession? Are they immune?

movieman

In a recession, if 10% of the population are out of work, then 90% are still employed.

Is that really so hard to understand?

RHemmings

al_yrpal wrote:

All that still doesn't explain how someone who hasn't yet been able to afford their own house is going to almost uniquely be in a sound position to buy one in a full scale recession? Are they immune?

It depends on the price of houses falling more than the typical buyer's purchasing power. If houses fall by 30%, and the typical purchasing power of buyers only falls by 10%, then houses are more affordable. This is particularly the case if houses devalue more evenly than purchasing power. In particular, if a fraction of the population loses all ability to purchase a house due to unemployment, while the majority of the population earns just as much as they did before.

Not everyone loses their job in a recession.

whambamboo

Tomthumb wrote:

If you have enough income to allow you to get a mortgage could you not buy in another area and rent it out to cover the mortgage. I know it means that you will still be renting where you are (and paying someone elses mortgage) but someone else will be doing the same for you and at the end of it you will have a property. Does that make sense?

No, it makes no sense at all. At the moment rents are very low relative to the mortgage, so the rent probably won't cover the cost of an interest-only mortgage. With an interest-only mortgage you don't pay off the house price, just interest on the debt (repayment mortgages are tax-inefficient). By all known measures, house prices are at historic highs, and advisers are predicting a fall in value.

So you are gambling on a rise in value, which is unlikely to happen.

Why not just borrow loads of money and buy some penny stocks instead? It's just as valid as an investment.

Your proposal gambles on house prices rising, which they might not do, especially in the short term. Honestly, it's less risky to put your money in the bank, and get 5.25%. ANd that's guaranteed.

whambamboo

al_yrpal wrote:

What lots of people here are forgetting is that the one and only house price crash we have had since WWII

Only one?



You quite sure?

Tomthumb

whambamboo wrote:

No, it makes no sense at all. At the moment rents are very low relative to the mortgage, so the rent probably won't cover the cost of an interest-only mortgage. With an interest-only mortgage you don't pay off the house price, just interest on the debt (repayment mortgages are tax-inefficient). By all known measures, house prices are at historic highs, and advisers are predicting a fall in value.

So you are gambling on a rise in value, which is unlikely to happen.

Why not just borrow loads of money and buy some penny stocks instead? It's just as valid as an investment.

Your proposal gambles on house prices rising, which they might not do, especially in the short term. Honestly, it's less risky to put your money in the bank, and get 5.25%. ANd that's guaranteed.

Maybe I'm just looking through rose tinted glasses having gained on every house purchase, I'm very pro buying property and like my money in bricks and mortar.