House Price Crash

PoorDave

realwildone wrote:

The most amazing point is that Martin thinks house prices are overvalued and may come down. All the noggins on here, the very site he set up to advise people about finance, are still recommending that people jump in and buy not one but two houses and rent one out at less money to someone they don't know.

Oh you lot really crease me up.

I know what you mean (for once!).

However, some people on here have seen large gains, and can't get it into their heads that they might not go on forever.

Although you could argue he set up the main site for formal advice and the forum (like any) for people to share their views.

Nobody has been held at gun point to follow advice of the type you mention in your post!

PoorDave

F_T_Buyer wrote:

Link to the data please?

House prices have not doubled in the LAST four years.

All i was doing was trying to was make sure people didn't think a 40% drop was less than it was. The OP of that comment about 4yrs got it from the Daily Mail, i think.

tomstickland

I bought 4 months ago and I went through all the various arguments in the preceeding year or so. In the end I decided that I wanted to own my own place, I was going to find a property that I liked for less than £100K, I could weather a price crash and serious interest rate rises.

I'm very happy with the flat I bought; I paid £86K for it, £76K mortgage, spent 4 weeks working on it, like the location, like the lifestyle. I made the right decision.

However, finding sub £100K properties is quite difficult and I sympathise with those who want to get on with their life. It's sad really, beacuse loads of young people are now paying a lot more per month than they ever would have before.

I agree with Andrew Smith - the big problem is those who see the house they want as a "must have" and borrow more than they can realistically afford. It's the usual ingnorance, laziness and lack of realism about what is affordable.

If prices do slide and rates rise there's going to be scores of sob stories in the papers and claims of miss-selling. All those gleefully expalining how they managed to borrow 6 x income on self cert will change tack to doing the "miserable face" in the local paper.

PoorDave

RHemmings wrote:

Look to the past. Properties became much more affordable after the last crash, and remained that way for years until bubble thinking took off again.

Of course they did - prices were lower!

But what happened to lending? Did the available multiples change? Or is it only this time round that lenders have gone so high? That was my point

mookybargirl

RHemmings wrote:

Presumably you made your decision after weighing up evidence both pro and con, after seeing a number of views on the future direction of the housing market. The people I really feel sorry are those who haven't found the resources and information sources that give a more balanced view, and are influenced by property !!!!!! and ramping articles in the press.

I guess you could say that but the truth is - that NO ONE knows what will happen. We can all speculate or give our opinion, and if/when a decline/crash whetever comes along - how many people will be giving it "I told you so".

My advice to anyone buying is simply be realistic with your finances, be prepared should a crash or interest hike come along. Consider the unexpected the same as you should be doing for everything else, not just in buying a house.

Zammo

PoorDave wrote:

Does anyone else wonder if mortgage lending multiples will reduce once the "crash" takes hold? So that the people who are waiting for a crash before they buy will actually find they still can't buy what they want, as their purchasing power has also reduced, despite price reductions.


Your thoughts.

If purchasing power is reduced then this will only put more downward pressure on house prices making them more affordable. Some sort of restrictions need to be put into place to stop irresponsible lenders giving 5-6 times salary multiples. It's a big factor in why prices are so ridiculous at the moment.

PoorDave

Zammo wrote:

If purchasing power is reduced then this will only put more downward pressure on house prices making them more affordable. Some sort of restrictions need to be put into place to stop irresponsible lenders giving 5-6 times salary multiples. It's a big factor in why prices are so ridiculous at the moment.

Agreed, i think.

My question is do we know if 5x will always be around, or do we think it drops as prices do?

RHemmings

PoorDave wrote:

Of course they did - prices were lower!

But what happened to lending? Did the available multiples change? Or is it only this time round that lenders have gone so high? That was my point

Too young to have been buying a house then. I have heard that just after the crash people said that it was extremely hard to get a mortgage. But that's hearsay. I don't have figures to hand.

GW65

RHemmings wrote:

Too young to have been buying a house then. I have heard that just after the crash people said that it was extremely hard to get a mortgage. But that's hearsay. I don't have figures to hand.

It would be a perfect (and, sadly, likely) example of banks being just as illogical as their customers....

When prices are high and rising, everybody wants to buy - when prices fall, everybody runs a mile. Logically, it makes more sense to buy after the crash since you've got less to lose in the worst case! Equally, for a lender it makes more sense to lend high multiples after the crash for the same reason.

The same thing happens in most markets. Just think of the stock market and how the average punter gave shares a miss when prices where low a few years ago but they're all piling their money in now that prices are higher (the odd jitter excepted).

Zammo

mookybargirl wrote:

My advice to anyone buying is simply be realistic with your finances, be prepared should a crash or interest hike come along. Consider the unexpected the same as you should be doing for everything else, not just in buying a house.

This is good advice. With interest rates rising it would be wise to take into account how much a 2-3% rise in interest rates would effect your mortgage, or if you're buying with a partner it's worth considering whether you could still make the repayments should one of you become unemployed. If it would send you over the edge financially then don't buy.