Do you think property prices will double in 10 years?

F_T_Buyer

There is some dangerous herd thinking here.

If house prices do double in the next ten years, it is because the average income rises to underpin the HPI. If the average income rises, interest rates will rise to keep real interest rates level with the rest of the world (circa 2%).

If interest rates rise to the levels needed, alot, and I mean alot, of people will get burnt in the short term as they are already maxed out at low interest rates.

This has happened time and again throughout history. It could happen, it might happen, it might not. But if you are relying on this strategy you need to make sure the debt you take on is manageable at far higher interest rates, with far higher living costs.


~

Infact, reading this has just made me think of the media and how they reported the price of oil. When it was $50, we were told it will fall to $30 very soon. When it was $70 we were told it would hit $100 shortly, when it has fallen to just below $60 we're told it has much further to fall.

This is just the herd finding its way, soon it will see another scarcrow and change direction. Until...

ChrissieI

Chichi wrote:

Worse case scenario: Interest rates double, rents remain the same might have to dig into pockets to pay the mortgage.

It's a risk.

I know i'm a bit late reading this thread but this made me smile.

Chichi If interest rates double are you sure rents would remain the same. Isn't there a good chance that as more people try to pay their own mortgage and not lose their homes that they may have to rent out spare rooms and so there could be more choice for people renting and so rents could go down.

Its just a thought.

movieman

In 26 years we have had two adjustments of between 20 - 25% and prices soon recovered.

If by 'soon' you mean 'after a decade, if people managed to keep paying their mortgage through years of negative equity'. I know of people who bought around 1990 whose houses didn't reach the previous bubble peak until around 2000, for example.

And, of course, the last bubble was small compared to the current one. By pretty much every measure (absolute, relative to income, etc) house prices today are the highest they've ever been in real terms.

So, sure, when house prices are at a peak in real terms they'll definitely double again in the next ten years. Definitely.

Isn't there a good chance that as more people try to pay their own mortgage and not lose their homes that they may have to rent out spare rooms and so there could be more choice for people renting and so rents could go down.

Exactly: that's one of the reasons why rents _DROPPED_ in the last crash along with house prices. Another, obviously, being that more people could afford to buy rather than rent.

The amazing thing to me is that so many people are rushing out to borrow six-digit sums to buy houses without even knowing these things. Most wouldn't even buy a car without spending a while investigating the market, yet borrowing 200,000 pounds for a house... no problem.

GardenMillie

Depends where the property is but in Edinburgh prices certainly seem to be going up - a house in my street (exactly the same as mine) had gone up by £25K (from what I paid) in 18 months. My last property I made £30K in two years and didn't do any major works.

If you can afford BTL and there is a market for rental property - go for it. Friends of mine have just gone down this route and I'm considering it for me as an investment.

ashm1

What of the future pensions crisis and the population age distribution changes ?

If all the money is in the house... how does one fund retirement where life expectancy is increasing and state pension is decreasing in relative value?

Edit: ...some potential pensioners could be particularly hurt bad if the housing market crashes

Edit:- Just my thoughts

Kind regards,

Ashley.

vishpatel

ashm1 wrote:

Edit: ...some potential pensioners could be particularly hurt bad if the housing market crashes

Only if they believed the hype.

ashm1

vishpatel wrote:

Only if they believed the hype.

.. and then blame the government when house prices fall!

Chichi_2

Mean Machine,

How can you say I've wasted everyone's time. I asked my mum who's a newbie investor to read this board to gauge general opinion. This forum is here so that Joe Public can debate and read others' views. Everyone had a choice to post or not, so how could I have wasted everyone's time??

I visited a great IFA today and he said 4 years ago if asked whether prices would rise in 5 years' time, he would have said no. Well they did rise!!!

Chichi_2

ChrissieI wrote:

I know i'm a bit late reading this thread but this made me smile.

Chichi If interest rates double are you sure rents would remain the same. Isn't there a good chance that as more people try to pay their own mortgage and not lose their homes that they may have to rent out spare rooms and so there could be more choice for people renting and so rents could go down.

Its just a thought.

How many people do you know with a spare room? Most FTB's can just about afford a place to swing a cat. If the average salary is mid- 20K in London, a 2 bed flat for a single person needs to be 91K, at present they're closer to 190K. So where will all these spare rooms be exactly?? People with bigger homes and more spare rooms will most likely not need the extra cash... but then again I could be wrong.

You see Mean machine, we're having a purposeful discussion here.

F_T_Buyer

Chichi wrote:

I visited a great IFA today and he said 4 years ago if asked whether prices would rise in 5 years' time, he would have said no. Well they did rise!!!

And if you asked an IFA whether prices would rise in 5 years' time, they would say yes.

See the pattern...

Or is it a SALESMAN telling you what you want to hear?