How long can FTB-s afford to wait?

julieq

Well we have car manufacture here, so what are you worried about? But again on a value chain analysis, more is spent on a car after it leaves the factory than it generates in margin to the factory. The basic components generate very little margin at all to sub suppliers. It honestly matters very little to anyone if they're made in Poland, Wolverhampton or Lisbon, they don't provide much in terms of valuable jobs. On the other hand there's a lot of valuable project work relating to supply (for example) of instrumentation and engine management systems, the servicing of a car throughout its life generates a great deal of profitable work, and so on.

We do high tech manufacturing here. Rolls Royce Aero engines are a great example. No-one for example would sub contract to China manufacture of turbine blades which are extraordinarily complex pieces of technology manufactured to extremely tight tolerances and requiring stringent audits at all levels. But it's quite right that we've moved away from low value manufacturing - raw metals processing, textiles and clothing, etc etc, which is all Portugal had.

It's a bit of a meme of the left that only traditional manufacturing generates real value and real jobs. In fact it's quite the reverse.

Pimperne1

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?

Put this on the other site or I am going to steal it and pretend its my idea.:T

HAMISH_MCTAVISH

Pimperne1 wrote: »

Put this on the other site or I am going to steal it and pretend its my idea.:T

Crack on.....

replumbed

julieq wrote: »

Well we have car manufacture here, so what are you worried about?

If you don't believe in high tech manufacture. You should look toward Germany.

For a woman, you write like a guy. Are you a man or woman?

Graham_Devon

julieq wrote: »

What you're saying there Graham is that house prices are attractive enough so that cash buyers remain in the market, but the relative proportions are rising because those needing mortgages are excluded. Which is pretty much agreeing with Hamish. When finance is available, more first time buyers will use it and the relative proportions of cash buyers and mortgaged buyers will correct.

No. What I was actually saying, is indeed, what I said.

There has always been cash buyers. Looking at them next to low amount of mortgages, and suggesting that cash buyers therefore see value, and take from that that there will be loads of investors queing up etc, is taking the fact that cash buyers exist, a little too far.

replumbed

HAMISH_MCTAVISH wrote: »

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.

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

A couple more for you.

3. Commandeer an empty home and claim squatter rights.

4. Shack up with another, and live rent free.

julieq

I'm going to take you back to 2009 now.

http://forums.moneysavingexpert.com/showpost.php?p=20325011&postcount=68

This was what I was saying roughly 2 years ago, pretty much at the bottom of the market. We now have 2 years history to back up my suggestions, which was that at that point in time for a cash investor, housing looked a decent investment. From this point with a significant rise in prices (I was working on the assumption of a 2 year fall then 5 years back to the nominal purchase value) it still looks a reasonable investment at a time of low interest rates and uncertain economic growth, especially since there should be reasonable nominal price growth over 5-7 years.

And obviously something is keeping cash buyers in the market. They don't have to buy houses, but clearly the more astute are seeing the opportunities I pointed out. Given first time buyers were out of the market from 2009 to now, prices were being sustained by something, and it would appear that cash buyers are seeing the opportunities. Anyway I'll see you back here in a couple of years to see what happens, but I agree with Hamish, there are first time buyers engaged in what is essentially a race to get back into the market, and that's why the ftb market is tighter than other sectors. That leads to price increases.

In the meantime, the bear arguments from that period really have not been borne out at all. Even Thrugelmir, who I count as a thoughtful bearish poster, was worrying disproportionately about interest rate increases. Some of the more extreme bears (where are you now, Fungusfighter?) were being dismissive and patronising and totally wrong.

HAMISH_MCTAVISH

julieq wrote: »

Some of the more extreme bears (where are you now, Fungusfighter?) were being dismissive and patronising and totally wrong.

I see nothing has changed then.

Jimmy_31

Shupufski wrote: »

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.

Finally somebody who knows the value of money:money:

I could have bought a home years ago when all my friends were buying theirs, i chose not to because i couldnt justify paying 150k plus for a tiny 2 bed terrace that in normal times was priced under 50k.

Im almost ready to having all the deposit, fees, and emergency fund in place and then i could purchase, prices for the type of house im looking at have come down in my area by about 20% but i still wont pay the prices sellers want because the cost is too great for what i will get in return.

Maybe im just old fashioned because to me if something is a blatant rip off then you just dont buy it.

I havent paid silly asking prices in the past and im not about to start doing so anytime soon, i suspect there are many more people just like me, i know of at least 2 others who i work with. Its also even harder for me to pay a silly asking price due to me working in the construction industry and knowing i could quite easily build a very nice home for under 50k, or could build a barrats style home for under 25k if i got the same discounts that they get from their material suppliers.

Graham_Devon

HAMISH_MCTAVISH wrote: »

I see nothing has changed then.

Quite right, you still do it all the time, what with your "false" response to other points of view.