House prices rises over time

verytricky69

des_cartes wrote: »

If you know what the house was worth in year x, find out what people earned in year x and compare the two. Then apply the same ratio to the house now. For example if the house cost 10k in 1980 and average wages were 3k then if average wages today are 30k then the house is worth 100k. Beware though, some people will try to convince you the house is worth 200k purely because before 2007 you coulkd borrow 6 times your income to buy a house. Those days have now gone so you now have to base the value of the house on what people can now borrow which is around 3 times your income.

This is simply not true.

des_cartes

davholla wrote: »

It is about £33k p.a.

http://www.statistics.gov.uk/cci/nugget.asp?id=285

So therefore the average price according to your calculation should be £99K.

Not really as most people need about 20% deposit and some lenders will still accept two incomes on which to base their lending. Also, in London, many foreigners are still buying houses because the pound is very weak which makes houses cheap for them but expensive for you and me. Outside of London you should be able to base what a house is worth on my original reply. A health warning though, do not confuse what a house is worth with what a seller is asking for it today. My calcultion is based on what a house will be worth once the economy recovers and house prices have fallen to where they should be. Beleiving a house is worth what someone is asking for it now could leave you with negative equity as prices still have some way to fall. Of course the banks and building societies know this which is why they are only lending 70-80%, in other words, when the price falls by 20-30%, it is your money that is lost and not theirs if they have to repossess.

FTBFun

des_cartes wrote: »

Not really as most people need about 20% deposit and some lenders will still accept two incomes on which to base their lending. Also, in London, many foreigners are still buying houses because the pound is very weak which makes houses cheap for them but expensive for you and me. Outside of London you should be able to base what a house is worth on my original reply. A health warning though, do not confuse what a house is worth with what a seller is asking for it today. My calcultion is based on what a house will be worth once the economy recovers and house prices have fallen to where they should be. Beleiving a house is worth what someone is asking for it now could leave you with negative equity as prices still have some way to fall. Of course the banks and building societies know this which is why they are only lending 70-80%, in other words, when the price falls by 20-30%, it is your money that is lost and not theirs if they have to repossess.

And what is the magical level?

Seriously, go to the Debate House Prices board. This one is for actual advice rather than your opinion. BTW I got 85% LTV on my property so they are lending appropriately to FTBs.

des_cartes

mudshark wrote: »

des_cartes if that's how you decide that's what a house is worth can I buy yours please?

Sorry, I sold mine in 2006 to someone who borrowed too much:rotfl:

des_cartes

FTBFun wrote: »

And what is the magical level?

Seriously, go to the Debate House Prices board. This one is for actual advice rather than your opinion. BTW I got 85% LTV on my property so they are lending appropriately to FTBs.

Did you pay the asking price or did you manage to get a reduction?

FTBFun

des_cartes wrote: »

Did you pay the asking price or did you manage to get a reduction?

£10k below (about 5%) - the asking price was too high but what I got it for was acceptable.

I don't see how that is relevant to your point though?

des_cartes

verytricky69 wrote: »

This is simply not true.

Can you still borrow 6 times your income then? I was told that people need big deposits now and they would not lend high ratios of incomes to buy houses. In fact I also heard the Bank of England were making these sort of loans illegal because they caused the financial crisis. Maybe i've got it wrong.

des_cartes

FTBFun wrote: »

£10k below (about 5%) - the asking price was too high but what I got it for was acceptable.

I don't see how that is relevant to your point though?

Well if you got 5% off and they lent you 85% that means prices can fall 20% and they would still not be out of pocket. Also, I think they put up the interest rate if you borrow more than about 70% as I guess the extra they charge can be put aside to go against future losses.

mudshark

des_cartes wrote: »

Sorry, I sold mine in 2006 to someone who borrowed too much:rotfl:

So you knowingly ripped them off? Lovely...!

As for your idea that lenders only lend 80%, or whatever, of a property's value due to anticipated price falls I'd like to see a link on that - I believe it's to provide a cushion for when some people can't make repayments.

Anyway, are you waiting until prices fall to a level that seems right before buying again? It's a risky game if you miss the bottom and whilst it's maybe OK when investing in the stock market I think for most of us taking that sort of risk with property is too big a risk. You sold in 2006 but prices peaked a year or 2 later, fell then recovered to 2007 levels at the moment. If they fall a lot more then you do well but if not and then when the Tories have sorted us all out (;)) they recover nicely you might not be feeling so comfortable. Not saying you will lose but you're playing a risky game.

Ankatden

There are many ways to do it but just taking average salary at a point in time and house prices at a point in time and assumming the same ratio still applies may work on the odd occasion but more likely to be massively out on many.

Tax rates change fundamentally over time especially in last 30 years as the movement from direct to indirect taxation has taken place so the proportion of income someone has as take home pay will have funfamentally changed.

In addition as interest rates are lower than they have been for 50 years then affordability is vastly different.

In addition the 1980's and early 1990's have the Council House sell off included so therefore someone getting 50% discount on their council house doesn't get included in the base which makes it difficult to compare.

House price "generally" rise over time but depends on where the base you start from, the area you are talking about and the attractiveness of that area to live in.