How long can FTB-s afford to wait?

HAMISH_MCTAVISH

I'll give an illustrative and somewhat hypothetical example, because the actual numbers aren't to hand.

Pre crash, anyone can buy, there is little to no pent up demand building, so sales to FTB-s are, say, 400,000 per year.

Post crash, a lot of aspiring FTB-s get caught out with insufficient deposits. So only, say, 200,000 FTB-s per year can buy, ie, those with rich parents, (access to BOMAD for deposits) or very high income.

The rest have to wait and start saving.

Now, assume that saving the deposit takes 4 years. (which is the number mentioned by a member of the MPC in a recent speech)

Then 4 years on from the crash, that missing group of FTB's from the first year after the crash would have their deposit and enter the market. In addition to the ongoing existing buyers with access to BOMAD.

FTB Sales would then look like the following:

2007 -- 400,000--- All FTB's
2008 -- 200,000--- BOMAD only
2009 -- 200,000--- BOMAD only
2010 -- 200,000--- BOMAD only
2011 -- 200,000--- BOMAD only <---- We are here
2012 -- 400,000--- BOMAD + Savers since 2008
2013 -- 400,000--- BOMAD + Savers since 2009
2014 -- 400,000--- BOMAD + Savers since 2010
2015 -- 400,000--- BOMAD + Savers since 2011

(which isn't that far away from whats actually happened so far, even though we're using nice round numbers for illustration only)

Now in reality, FTB numbers probably won't double next year, but you get the idea.

At some point, be it this year, next year, or the year after, significant numbers of FTB-s that have managed to save the deposit since 2008 are going to start being added to the existing pool of FTB-s with access to BOMAD.

So if someone want's to say there is no race for FTB-s to buy in the next 6-12 months, I'd probably agree with that.

But at some point in the next year or two, a pretty big surge in demand is going to crash into several years of incredibly low housebuilding, and the only possible result is rising prices and real constraints around choice of decent FTB properties.

So there most certainly is a time pressure on FTB-s to get in before that happens.

The question is, when will it happen?

Cleaver

Hamish, you really, really do need a hobby.

HAMISH_MCTAVISH

Cleaver wrote: »

Hamish, you really, really do need a hobby.

Bear hunting IS my hobby.

You mean that doesn't count?

But seriously, this thought has been rattling around at the back of my mind for a while.

An awful lot of people have been forced into saving for a deposit. At some point, they'll have those deposits, and will add to the pool of buyers.

That point may not be as far away as some posters think....

greenbubble

interesting thought experiment , i will peruse at my leisure later , but two points jump out immediatley for comment.

a) you are making an assumption that a member of the mpc actually knows what they are doing or what they are on about

b) how long can BoMaD provide further funding with below inflation savings rates alongside the reduction in MEW and the increasing cost of living.

as you stated they are assumptions made for the purpose of your post , but its hard to really extrapolate any accurate conclusions (especially with point b , unless you have some insight/data that allows you to keep your assumption constant.)

greenbubble

nembot

Gotta agree with Cleaver here, perhaps you could try politics Hamish?

System

I see where you're coming from but I can't even begin to guess at what sort of numbers we're talking about.

morag1202

I've been thinking this too, both my kids are buying this year, having saved for longer than they'd originally planned.

Graham_Devon

Not sure if it helps. But I haven't been thinking this.

HAMISH_MCTAVISH

greenbubble wrote: »

a) you are making an assumption that a member of the mpc actually knows what they are doing or what they are on about

Oh, I don't think it much matters whether they're right about it being 4 years.

The point being it will happen at some point.

b) how long can BoMaD provide further funding with below inflation savings rates alongside the reduction in MEW and the increasing cost of living.

It's a new BOMAD each year.

I don't think there's going to be a significant change in the short to medium term..... All housing wealth is ultimately recycled to future generations.

75 year old grandparents die, and leave inheritances to 50 year old parents, who use part of it to help 25 year old children with deposits, for example.

I don't think a 0.8% decrease in real household disposable income this year will have a noticable change on BOMAD funding. Nor realistically, any similar changes in the next few years.

as you stated they are assumptions made for the purpose of your post , but its hard to really extrapolate any accurate conclusions

No, it's really just a subjective opinion at this point.

But the beauty of this board is that with a bit of debate, and a few posters contributing hard data, it often becomes much easier to build a more solid theory.

Coeus

HAMISH_MCTAVISH wrote: »

I'll give an illustrative and somewhat hypothetical example, because the actual numbers aren't to hand.

Pre crash, anyone can buy, there is little to no pent up demand building, so sales to FTB-s are, say, 400,000 per year.

Post crash, a lot of aspiring FTB-s get caught out with insufficient deposits. So only, say, 200,000 FTB-s per year can buy, ie, those with rich parents, (access to BOMAD for deposits) or very high income.

The rest have to wait and start saving.

Now, assume that saving the deposit takes 4 years. (which is the number mentioned by a member of the MPC in a recent speech)

Then 4 years on from the crash, that missing group of FTB's from the first year after the crash would have their deposit and enter the market. In addition to the ongoing existing buyers with access to BOMAD.

FTB Sales would then look like the following:

2007 -- 400,000--- All FTB's
2008 -- 200,000--- BOMAD only
2009 -- 200,000--- BOMAD only
2010 -- 200,000--- BOMAD only
2011 -- 200,000--- BOMAD only <---- We are here
2012 -- 400,000--- BOMAD + Savers since 2008
2013 -- 400,000--- BOMAD + Savers since 2009
2014 -- 400,000--- BOMAD + Savers since 2010
2015 -- 400,000--- BOMAD + Savers since 2011

(which isn't that far away from whats actually happened so far, even though we're using nice round numbers for illustration only)

Now in reality, FTB numbers probably won't double next year, but you get the idea.

At some point, be it this year, next year, or the year after, significant numbers of FTB-s that have managed to save the deposit since 2008 are going to start being added to the existing pool of FTB-s with access to BOMAD.

So if someone want's to say there is no race for FTB-s to buy in the next 6-12 months, I'd probably agree with that.

But at some point in the next year or two, a pretty big surge in demand is going to crash into several years of incredibly low housebuilding, and the only possible result is rising prices and real constraints around choice of decent FTB properties.

So there most certainly is a time pressure on FTB-s to get in before that happens.

The question is, when will it happen?

This is uncanny now Hamish Our views are near perfectly aligned though I defer to one with greater experience than I.

Very informative - and much to my own advantage

Running_Horse

Not that I care one way or the other, but...

In the past lot of people jumped into the housing market when they didn't have to have a deposit.

How many discussions on the sane board do we get from people who want to buy, but can't save a deposit?

It would be wrong to asssume that everyone who suddenly needed a deposit started dilligently saving for one. Many will be waiting (possibly in vain) for a return of 100% mortgages.

I agree there will be a surge of those who have saved, but doubt the numbers you are assuming.