Why as a homeowner trading up are property rises good for me

HAMISH_MCTAVISH

whatawaste wrote: »

people trying to explain why rising prices would be a good thing is now happening here.

And i don't have a clue what 95% of them are talking about...

I'm going to try and explain this really simply.

When the house price crash happened, not all properties fell by the same amount in percentage terms.

And when the recovery happened, not all properties rose by the same amount in percentage terms.

This was one of the big mistakes that most people in favour of a crash made.... They mistakenly assumed all property values would fall by pretty much the same percentage.

In some cases however, peoples existing flat/house value fell by far more than the value of the house they wanted to buy.

In general terms, on average, the value of typical entry level FTB properties fell by more than the value of typical second tier properties.

So, as an example to make it clear.....

Inner city flats in northern cities like Leeds, Manchester, in general suffered the worst falls in the mainland UK. In early 2009 they were down 40% from peak. At the same time a decent terrace in a nicer suburb in the north was only down 20%.

So if your flat started out at 100K, and the terrace you wanted to buy started out at 160K, then the following happened:

Flat at peak = £100,000. Minus 40% crash, now worth £60,000.

Terrace at peak = £160,000. Minus 20% crash, now worth £128,000.

Gap between the two at peak = £60,000 (cost to upsize)

Gap between the two after the crash = £68,000 (cost to upsize)

So in this example, the crash widened the gap between the rungs on the property ladder, and made it more expensive to upsize.

Conversely, when the recovery happened, some of those FTB type properties rose faster than the second tier properties, so the gap actually narrowed with rising prices.

Now I accept that for some people, in some areas, with some types of housing, the crash narrowed the gap. But you cannot say a house price crash universally makes it easier/cheaper to upsize. Because as we have seen, that is simply not the case. For significant numbers of people, it made it more expensive.

The_Fox_3

HAMISH_MCTAVISH wrote: »

I'm going to try and explain this really simply.

When the house price crash happened, not all properties fell by the same amount in percentage terms.

And when the recovery happened, not all properties rose by the same amount in percentage terms.

This was one of the big mistakes that most people in favour of a crash made.... They mistakenly assumed all property values would fall by pretty much the same percentage.

In some cases however, peoples existing flat/house value fell by far more than the value of the house they wanted to buy.

In general terms, on average, the value of typical entry level FTB properties fell by more than the value of typical second tier properties.

So, as an example to make it clear.....

Inner city flats in northern cities like Leeds, Manchester, in general suffered the worst falls in the mainland UK. In early 2009 they were down 40% from peak. At the same time a decent terrace in a nicer suburb in the north was only down 20%.

So if your flat started out at 100K, and the terrace you wanted to buy started out at 160K, then the following happened:

Flat at peak = £100,000. Minus 40% crash, now worth £60,000.

Terrace at peak = £160,000. Minus 20% crash, now worth £128,000.

Gap between the two at peak = £60,000 (cost to upsize)

Gap between the two after the crash = £68,000 (cost to upsize)

So in this example, the crash widened the gap between the rungs on the property ladder, and made it more expensive to upsize.

Conversely, when the recovery happened, some of those FTB type properties rose faster than the second tier properties, so the gap actually narrowed with rising prices.

Now I accept that for some people, in some areas, with some types of housing, the crash narrowed the gap. But you cannot say a house price crash universally makes it easier/cheaper to upsize. Because as we have seen, that is simply not the case. For significant numbers of people, it made it more expensive.

There is some truth in what you are saying Hamish, which also explains why the price falls are not seen as greater than what they already are. I have seen flats, terraced, and semis on the market for months at well below peak prices and still nobody is willing to take the bait. Then you get the top end of the market which seems to be holding up well and making the market look better than what it really is.

Yesterday for example I saw a property come off the market after about five reductions and a drop in price from £220k to £155k, the peak price was about £235k

HAMISH_MCTAVISH

The_Fox wrote: »

There is some truth in what you are saying Hamish, which also explains why the price falls are not seen as greater than what they already are. I have seen flats, terraced, and semis on the market for months at well below peak prices and still nobody is willing to take the bait. Then you get the top end of the market which seems to be holding up well and making the market look better than what it really is.

As to the difference between upper level and lower level price performance, most of the indices mix adjust specifically to remove this skew.... So it's not really possible to claim it as a cause of indices being higher.

Yesterday for example I saw a property come off the market after about five reductions and a drop in price from £220k to £155k, the peak price was about £235k

Perhaps in your area this is true. But in others it's not.

The problem with internet boards such as this one is that people are all looking at the national market statistics, and comparing it to their local experiences.

Which may or may not correlate very well to what they are seeing on the ground.

Where I live house prices are noticeably higher than they were in 2007, and houses are selling for those prices. And everywhere I look in most of the northern half of Scotland, prices are at a similar or higher level to the previous peak.

So if I didn't see the national statistics, I would have no idea a house price crash had even happened.

.