RICS-Jan: Prices falling in less than half the country, 3rd month of improvement

IveSeenTheLight

Mallotum_X wrote: »

"To follow up, when I first bought, I could just afford a property valued at £50k.
We did so on a 100% mortgage."

"The £30k deposit was made up from £20k from 20% property appreciation and £10k from the original equity deposit."

Which statements relate to actual events?

This was an actual event

Mallotum_X wrote: »

"To follow up, when I first bought, I could just afford a property valued at £50k.
We did so on a 100% mortgage."

This was in the hypothetical example of a £100k property increasing 20% after initially having a £10k deposit put down on it

Mallotum_X wrote: »

"The £30k deposit was made up from £20k from 20% property appreciation and £10k from the original equity deposit."

Clear now?

IveSeenTheLight

Nenen wrote: »

I would have thought that, given your scenario of a single income being sufficient to buy and live in a flat, when a partner moves in, then during the period of dual income it would be perfectly possible to save £20,000 over the course of 2-4 years.

This would be true and possible, but not necessarily a consideration in my example.

You are including a timeframe which is not necessarily applicable.

I have a good example I could try to put in.

I have a friend who bought a flat on his own. Did well for himself, increased his earnings

He then met a nice lady who lived with her month and dated for a period, before deciding to move in together.

They decided to get a place together, rather than her move in with him.

So there was no 2-4 years saving whilst hoping for a stagnant market.

So in this simple example, without getting into their personal financia details, it shows how a person owning a small property is aided going up the ladder by HPI due to the increased leverage deposit they are able to benefit from.

A stagnant or depreciating market could make it far more difficult to upsize (assuming credit is available.

Mallotum_X

IveSeenTheLight wrote: »

This was an actual event


This was in the hypothetical example of a £100k property increasing 20% after initially having a £10k deposit put down on it


Clear now?

Yes clear now, you used your hypothetical example in answering my question about your actual experiance. Clear now but it wasnt very helpful

IveSeenTheLight

Mallotum_X wrote: »

Yes clear now, you used your hypothetical example in answering my question about your actual experiance. Clear now but it wasnt very helpful

No, I used a hypothetical example about moving from one £100k property to a £200k property with the hypothesis of 20% reduction, stagnation and 20% increase to show the effects on the deposit requirements.

I then followed up with a personal experience of how I started with a 100% mortgage and then upsized to a larger 80% LTV property aided by the increase in property prices.
Without the increase in equity I gained, I might have not had the opportunity to get the larger property.

After I made the two posts, you merged the two seperate points together making an incorrect assumption.
No probs now though if it's clearer

Mallotum_X

IveSeenTheLight wrote: »

No, I used a hypothetical example about moving from one £100k property to a £200k property with the hypothesis of 20% reduction, stagnation and 20% increase to show the effects on the deposit requirements.

I then followed up with a personal experience of how I started with a 100% mortgage and then upsized to a larger 80% LTV property aided by the increase in property prices.
Without the increase in equity I gained, I might have not had the opportunity to get the larger property.

After I made the two posts, you merged the two seperate points together making an incorrect assumption.
No probs now though if it's clearer

You are funny I didn't bring up anything about the "equity deposit" until you replied to me about it, in reply to my post purely about your experiance... If you hadnt dragged the "equity deposit" into things then it would have been nice and clear all the way though.

The only person merging points is you in this one

the_flying_pig

IveSeenTheLight wrote: »

No, I used a hypothetical example about moving from one £100k property to a £200k property with the hypothesis of 20% reduction, stagnation and 20% increase to show the effects on the deposit requirements.

I then followed up with a personal experience of how I started with a 100% mortgage and then upsized to a larger 80% LTV property aided by the increase in property prices.
Without the increase in equity I gained, I might have not had the opportunity to get the larger property.

After I made the two posts, you merged the two seperate points together making an incorrect assumption.
No probs now though if it's clearer

That’s extremely myopic [I could be far less polite], though, isn’t it.

I’ll use 10% changes because the maths is easier. I’ll assume that you always need to put down a 10% deposit for a house & that you’ve paid nothing off your first mortgage, which you put the minimum possible deposit down for. Three scenarios when you’re considering trading up to a house that’s worth double your old one.

(A) Prices stay the same [market value of old - £100k, new – £200k] – need £10k up front for deposit [i.e. 10% of £200k less your old £10k], your new total debt will be £180k.

(B) Prices go down 10% [market value of old - £90k, new – £180k] – need £18k up front for deposit [i.e. 10% of £180k – all your old deposit has been wiped out], total debt will be £162k – relative to (A) you’re coughing up an extra £8k deposit [which you need to find up-front] and seeing your debt reduced by £18k.

[C] Prices go up 10% [market value of old of old - £110k, new - £220k] – equity in your old house is £20k so you only need another £2k for a deposit [£22k being 10% of £200k], total debt will be £198k – relative to (A) you’re effectively taking on £18k extra debt in return for a £8k smaller up-front deposit requirement.

Your claims about inflation making the trader-upper better off rest crucially on certain assumptions, specifically:

(i) The trader-upper had only put down the minimum possible deposit on his old place [and hasn’t made significant mortgage repayments] & will, therefore, fall foul of minimum deposit requirements for the new place without saving and/or inflation];

(ii) The large slug of extra debt [which will always be greater than the increase in equity] somehow doesn’t matter.

IveSeenTheLight

the_flying_pig wrote: »

That’s extremely myopic [I could be far less polite], though, isn’t it.

I’ll use 10% changes because the maths is easier. I’ll assume that you always need to put down a 10% deposit for a house & that you’ve paid nothing off your first mortgage, which you put the minimum possible deposit down for. Three scenarios when you’re considering trading up to a house that’s worth double your old one.

(A) Prices stay the same [market value of old - £100k, new – £200k] – need £10k up front for deposit [i.e. 10% of £200k less your old £10k], your new total debt will be £180k.

(B) Prices go down 10% [market value of old - £90k, new – £180k] – need £18k up front for deposit [i.e. 10% of £180k – all your old deposit has been wiped out], total debt will be £162k – relative to (A) you’re coughing up an extra £8k deposit [which you need to find up-front] and seeing your debt reduced by £18k.

[C] Prices go up 10% [market value of old of old - £110k, new - £220k] – equity in your old house is £20k so you only need another £2k for a deposit [£22k being 10% of £200k], total debt will be £198k – relative to (A) you’re effectively taking on £18k extra debt in return for a £8k smaller up-front deposit requirement.

Your claims about inflation making the trader-upper better off rest crucially on certain assumptions, specifically:

(i) The trader-upper had only put down the minimum possible deposit on his old place [and hasn’t made significant mortgage repayments] & will, therefore, fall foul of minimum deposit requirements for the new place without saving and/or inflation];

(ii) The large slug of extra debt [which will always be greater than the increase in equity] somehow doesn’t matter.

Totally agree with your post (apart from you using 10% because it's easier to calculate than 20%)

I've acknowledges that HPI means you have to pay more in the long run.

My point remains however that it is easier to have the deposit requirements upsizing in an HPI market than in a stagnant or depreciating market.

IveSeenTheLight

Mallotum_X wrote: »

You are funny I didn't bring up anything about the "equity deposit" until you replied to me about it, in reply to my post purely about your experiance... If you hadnt dragged the "equity deposit" into things then it would have been nice and clear all the way though.

The only person merging points is you in this one

It's quite clear.
I made a hypothetical example in post 29.
Followed up with a personal example in post 34.
You then merged the two situations in post 36.

Throughout, I had been discussing the deposit requirements

Graham_Devon

Another day, another argument that higher, and rising house prices actually help normal people.

It doesn't. Don't talk such rubbish.

It helps BTL's and property investors. End of.

the_flying_pig

IveSeenTheLight wrote: »

Totally agree with your post (apart from you using 10% because it's easier to calculate than 20%)

I've acknowledges that HPI means you have to pay more in the long run.

My point remains however that it is easier to have the deposit requirements upsizing in an HPI market than in a stagnant or depreciating market.

er, right.

yes, i suppose if you are a person whose ability to buy is primarily constrained by deposit requirements [rather than lending multiples or plain old aversion to collossal debt] the inflation 'helps' you get a pwoperdee more quickly, albeit more expensively, than would otherwise be the case.

so, firstly, the benefit is only one of timing rather than cost, and, secondly, it's only a 'benefit' at all to someone who's primary constraint is deposit requirements.