Surely House prices will always go up

Loopgames

I'm of the opinion that we will have another dip soon but if I think about the bigger picture won't house prices always go up?

So as long as you can ride the storm for 1 to 5 years (?) there will be a correction but surely they have to go up again.

It's the immediate term that people are currently worried about.

Inflation will at least see to it that property prices go up surely.

Dan:_4

They may dip slightly but the main crash of 20% has already happened for this cycle. The next big crash will be in about 20 years but by then house prices will be double then today.

Generali

Loopgames wrote: »

I'm of the opinion that we will have another dip soon but if I think about the bigger picture won't house prices always go up?

So as long as you can ride the storm for 1 to 5 years (?) there will be a correction but surely they have to go up again.

It's the immediate term that people are currently worried about.

Inflation will at least see to it that property prices go up surely.

If you think there will pretty much always be inflation and that wages will keep up or outstrip it then the rest of your argument is pretty much bound to be correct.

andrewmp

Someone who bought a house in 2007 on a 100% mortgage, is likely to still be in negative equity 5 years later. Riding the storm for 5 years doesn't always work.

Blacklight

It's always amused me how this is brought up by various people when price data indicates the smallest of falls;

"HA! -0.1% fall this month... house prices only go one way though don't they!"

Conveniently overlooking the fact that yes, they do.

new_home_owner_3

andrewmp wrote: »

Someone who bought a housin e in 2007 on a 100% mortgage, is likely to still be in negative equity 5 years later. Riding the storm for 5 years doesn't always work.

house prices did go back up at the begining of the year, your predicting that houses wont increase for the next two years?

Im not saying they will or they wont, but a lot of people who bought in 2007 are currently now on a low svr rates, where they should be able to pay big lumps out of the capital, with interest rates being so low.

andrewmp

new_home_owner wrote: »

house prices did go back up at the begining of the year, your predicting that houses wont increase for the next two years?

Im not saying they will or they wont, but a lot of people who bought in 2007 are currently now on a low svr rates, where they should be able to pay big lumps out of the capital, with interest rates being so low.

I'm predicting house prices will not reach their 2007 peak by 2012 (taking into inflation).

It's just a prediction though.

If we use actual stats (including inflation). House prices are lower now than they were 5 years ago. Certainly blows the 5 year theory out of the water.

Inflation adjusted house prices were actually higher in 1989 than they were in later 2001 so even 10 years isn't a guarantee of a good inflation busting investment.

Not everyone will be on SVR, lots of "prudent" people fixed for security and are still paying 6%. I suppse it's true that fortune favours the brave!

chucknorris

andrewmp wrote: »

Someone who bought a house in 2007 on a 100% mortgage, is likely to still be in negative equity 5 years later. Riding the storm for 5 years doesn't always work.

My wife and I bought a house in Feb 2008 (but had agreed the price in 2007). It has lost about 30-35k value but we are saving about 10k a year on interest with our 0.38% over Boe base lifetime tracker. I can't see rates going up quickly so we are better off for buying it earlier at a higher price. Additionally when rates eventually do go back up I estimate we will be about 1% better off to current mortgage deals with our tracker mortgage. So we will still be saving approx 2k a year. We won't be selling for about 15-20 years so this dip is virtually meaningless.

andrewmp

chucknorris wrote: »

My wife and I bought a house in Feb 2008 (but had agreed the price in 2007). It has lost about 30-35k value but we are saving about 10k a year on interest with our 0.38% over Boe base lifetime tracker. I can't see rates going up quickly so we are better off for buying it earlier at a higher price. Additionally when rates eventually do go back up I estimate we will be about 1% better off to current mortgage deals with our tracker mortgage. So we will still be saving approx 2k a year. We won't be selling for about 15-20 years so this dip is virtually meaningless.

You were lucky rates didn't go up though. If they had, house prices would have dropped more and you'd be paying far more in repayments too.

You took a risk and won. Some people who couldn't afford the risk would have fixed and "lost". Such is life.

Not many were predicting BOE base rate of 0.5% in February so fair play.

macaque_2

Loopgames wrote: »

I'm of the opinion that we will have another dip soon but if I think about the bigger picture won't house prices always go up?

So as long as you can ride the storm for 1 to 5 years (?) there will be a correction but surely they have to go up again.

It's the immediate term that people are currently worried about.

Inflation will at least see to it that property prices go up surely.

That is a dangerous approach to investment and you get badly burnt. The Japanese had a price bubble in the 90s. If you picked your timing wrong, you could have paid more for a house in 1976 than you would have paid in 2006.




UK property faces major long term risks:

Falling incomes:
We are being exposed to global competition as never before. Wage inflation has virtually stopped and in many areas is going down. For example, recruitment salaries for new graduates have plunged in the last 2 years.

Rising unemployment:
Unemployment is set to rise sharply over the next few years. Unemployed people still need homes but they cannot afford £100k houses.

Loss of subsidies:
The new government have recently stripped out £billions of income from the property market by capping housing benefits.

Tax changes:
A single budget speech by the chancellor could transform property values overnight by imposing capital gains tax (as they have in France). We have already seen the tax net closing in around property (loss of miras, rising council taxes and stamp duty)

Demographic changes:
The predictions for population increase are extrapolated from a period when the UK government and private individuals were borrowing £100s billions to spend on goods and services. How many immigrants will want to stay in an overcrowded, cold, wet and jobless Britain.

Sentiment:
Britain has the most overpriced homes in the world and the success of the millenium bubble has created unrealistic expectations. However, just as expectations can be a catalyst for unrealistic rises, negative sentiment can also become self fulfilling and create breathtaking falls (e.g. 70%).

It would not be surprising to see house prices cheaper in 40 years time than they are today.

FTBFun

A single budget speech by the chancellor could transform property values overnight by imposing capital gains tax (as they have in France). We have already seen the tax net closing in around property (loss of miras

1. There already is capital gains tax - I assume you mean withdrawal or a cap in principal private residence relief?
2. Miras was withdrawn in 2000. House prices obviously plummeted after that.

Also what relevance is the situation in Japan?