How long can FTB-s afford to wait?

Out,_Vile_Jelly

I would like to think that the current situation has made people sit up and think a bit about what they're actually paying for. Nice properties in nice areas will always be sought after and you can't argue with that. An awful lot of Britain's housing stock is mediocre at best though. Are future FTBs really going to fight each other to pay 2007 prices for pokey 1 bed new build flats on dump estates?

abaxas

We have no idea of the number of people who would buy, only the number who have.

Also a FTB is not just what we think it is, it is also someone returning to the market.

Therefore, you simple cant extrapolate that there is any pent up demand at all. There is no data to say either way.

However the interesting fact is the ratio of sold properties to stock ratio added to average FTB age means that someone buys a house, lives in it for all his/her life, dies, then sells. IE if anything there is pent up demand to sell, people buy more than once if their lifetimes.

Percy1983

For the first time I will say I do beleive there is a good point to what hammish is saying in this case. I wouldn't agree its all going to hit next year but I do feel I am in a bit of a race with other savers to get in before anything silly happens.

As it is we have been aggressively saving and really cut back, I will admit the first part was just getting the balance sheet in order and paying all credit cards off (nobodies fault but our own) to which we are just about there, with that the actual time to save the deposit if we stay on track will be 12-18months (which funnily does put us in 2012/13)

By all means if the 100% mortgages came back in force I would buy today before the dust settles and people actually realise what is going on.

geneer

julieq wrote: »

The OP is a bit of a troll, but can we please nail the myth that mortgage payments somehow end up in bankers' pockets?

Actually where a lot of them end up is as savings interest. You know, those above interest savings rates everyone is complaining about having lost.

By "a lot" do you mean very little?
One only needs to compare the typical savings rate to the typical
mortgage rate.

HAMISH_MCTAVISH

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?

And it looks like the first of those savers may be here already....

A small jump in the number of mortgages approved in February was driven by an increase in the number of first-time buyers, figures reveal today.

The total number of mortgages increased in February, up 8% in volume to 32,000 and 5% in value to £4.6 billion, the Council of Mortgage Lenders (CML) says.

First-time buyers made the largest contribution with 12,400 mortgages worth £1.4 billion, a 13% increase in volume from January

Shupufski

HAMISH_MCTAVISH wrote: »

And it looks like the first of those savers may be here already....

I like your analysis wee scotsman, it’s like you - simple.


In terms of human behaviour I suspect that anyone who has spent 4 years saving a deposit is likely to be more circumspect about buying a house.

These people may not simply accept silly asking prices and may drive a hard bargain or stay on the sidelines waiting for better value.

The boom times you so commonly mistake for normality were driven, in part, by ease with which people could borrow. The lack of skin in the game created a greater sense of detachment between price and value.

Shupufski

RenovationMan wrote: »

They might find that staying on the sidelines waiting for better value means that they miss out on the decent properties that come up for sale*. For every person (on here or HPC) who is waiting for 20% drops, there are (perhaps) 5 others who have been waiting for 10% drops and are happy to buy.

We bought in 2010 after monitoring the market for a couple of years (after the crash) and found that the decent stuff marketed at a reasonable price was still selling reasonably quickly.

*Please note that I couldnt care less about the perpetual Bear Vs Bull fight on here. I just express a view based on experience and logic. If people dont like my view because it doesnt fit their VI, then tough luck. My personal view does not represent anything other than my personal view.

I think we generally agree old chap.

Everyone will have different perception of when is the right time and what represents value. But my general point is that FTB's armed with deposits will not simply purchase in droves because they have the money.

abaxas

RenovationMan wrote: »

I think you are right, we agree in principle. Certainly after spending years and years saving up a FTB is not going to rush into anything, but then properties that tick all the boxes for one FTB will usually tick all the boxes for many others. At the moment though FTB's seem to be few and far between so the ones who have a decent deposit and can obtain cheap credit are in the driving seat. How long this lasts though is debatable.

I was in the same position in 1995 when I bought my first house at pretty much the bottom of that crash. There were plenty of properties available, but only a few of them ticked the boxes. Luckily I was in a position where I could move forward quickly when I finally found the right property for me.

Location location location.

I'm up in the NE (near Newcastle) and the choice/availability is amazing. Whatever you want is available but not all are at the price people are willing to pay.

HAMISH_MCTAVISH

Shupufski wrote: »

But my general point is that FTB's armed with deposits will not simply purchase in droves because they have the money.

Yet both the number of FTB-s and also the amount they are paying for houses is increasing.

And with rents increasing markedly, and prices now rising again, not buying is a bit, well, stupid. Which probably explains your stance on the matter.

HAMISH_MCTAVISH

Shupufski wrote: »

Everyone will have different perception of when is the right time and what represents value.

But this is just utter nonsense.

There are only two choices.

1. Pay the market rate for houses.

2. Pay the market rate for rent.

In the long term, buying is massively cheaper than renting.

And now even in the short term, rent is more expensive than mortgage interest in 80% of the UK.

Your perception of "what represents value" is an irrelevancy.