MSE News: Guest Comment - Glimmer of hope for first time buyers

AndersLimpar_2

Damn tiled flooring!

Gorgeous_George

It is time to forget Government scams that encourage the young to buy half of something that they cannot afford in full. We need...

1. more houses
2. MIRAS for FTBers
3. final sale CGT (where moving up the ladder is tax free but moving down/selling up is taxable).

GG

MJL81

Homebuy, walletshare, soulsurrender, etc. for this generation is sick. Just as we all pay to prop the banks irresponsible actions, we pay to prop up over inflated house prices. We know why this situation has come about and who benefits from a higher value.

I think it's disappointing to hear some talk with condemnation for us, personally I save hard, and other factors in my life steer me away from frappo-cappo coffee shakes and even iPods! But I know the numbers well enough to know that would make squat difference. Like many looking up at the first rung of the upside-down Jacob's Ladder, we have family/friends who've taken out loans against the equity, re mortgaging against the inflated value, tell me that if they'd all worked harder to make repayments, they'd be forced to keep house prices high. Now praying for interest to stay low, while I watch savings slip further from assisting a home purchase.

With savings at around 15/20% deposit, I'm ready to buy right? But what I'd have left to loan would still be around 4.5 salary multiplier. So sure, I'll probably have enough in savings in a few years, but I'm wondering if I really want to put my hard saved down against the risk that the poor sods next in line might not have any hope, even with the new package that is sure to be offered 'BuyFromSatan' where you'll be able to contract out of govt. pension, NHS healthcare, etc. for life in return for a loan of the amount you can't pay after financial crippling yourself.

A good policy (off topic though) is the govt. reduction of housing benefit, which will force rents down across the board :T

Shared purchase isn't the answer, allowing the prices to naturally adjust. Maybe we should ask as the Libyans have; Baseball bats for FTBs waging war against estate agents and other with dirty hands in the cookie jar.

amontlake

I deplore Martin giving this article 'guest' status. Its author should have been told to come here and slug it out with us.[/QUOTE]

Ok, I am here to "slug it out"!

First point, I did not pay to have an article on here, but was asked to give my honest comments on the plight of FTB's and how shared owership works. If you note I do not come across as a mad fan of this, but it is a means to an end for many people who are desperate to get onto the housing ladder and will suit some.

My views are of course there to be shot down, which I respect, but are developed from over 15 years as a mortgage broker. I still see clients every day and many FTB's say similar things.

FTB's do not want lower house prices, they want lower price houses - the difference is key. If house prices fall 25% or 30% then the housing market will completely stagnate as noone will sell. It is even happening now as vendors refuse to accept lower, more realistically priced offers despite recomendations from the better estate agents.

The issue is supply and demand, hence prices will not fall, especially in places like London, until the supply issue is solved. Basically we need more, sensibly priced houses built pronto and if schemes like Firstbuy help to do this, by supporting the housebuilders, then it is a means to an end.

Faced with a housing crisis in the UK, a growing population and a housing supply that is hopelessly under stocked, and recognising how important a healthy property market is to the wider economy, the Government have at least tried something, though in my opinion not enough, and there are certain issues with the scheme which I pointed out.

First time buyers were always perceived as being the lifeblood of the property market, freeing up the bottom end of the market that allowed others to step up to the next level and so on. This position today is being challenged by a growing number of cash buyers, many of whom are foreign property investors keen to take advantage of strengthening rental yields and looking for a safer home for their money than perhaps in their home countries.

The worry for the property market as a whole is that if house prices remain high due mainly to a lack of good quality housing stock and mortgage lending continues to be difficult for those looking at higher loan-to-values, 1st time buyers will continue to be a rare breed.

There is a danger that property ownership is becoming the preserve of the “haves” rather than the “have nots”. With rents strengthening and property landlords becoming more powerful, are we in the midst of another social change which will see more people renting, especially in London, than owning?

No one wants to see a return to the days of Rachmanism!

And I am not talking down to FTB's when talking about saving. I see it all the time where buyers demand high loan-to-value loans or take money from parents but are not prepared, or do not expect, that they should curb some spending and save more - it is good practice and, if you also note, I do state that I believe all buyers should put in at least 10% deposit as good practice.

I do not pretend to have all the answers but am entitled to air my views and care passionately about the mortgage and property market. Simply wishing for a house price crash is not the answer and will damage everyone further.

We all want the same thing - a robust, realistically priced property market with a high number of transactions based on affordable, sensible prices and borrowing.

poppy10_2

amontlake wrote: »

FTB's do not want lower house prices, they want lower price houses - the difference is key.

I've read that sentence several times, I still don't understand what you mean.

If house prices fall 25% or 30% then the housing market will completely stagnate as noone will sell.

You underestimate the stampede effect. Prices falling 30% over a year or two could cause panic and a rush to sell before prices fall further. In any case, many people won't have the luxury of refusing to sell just because they can't attain the price they want. Particularly once interest rates start to rise from their 500-year low level, you can expect to see a wave of forced sellers who aren't able to keep up with their mortgage payments.
The housing market is already stagnating. Mortgage approvals are at ten-year lows. With increasing unemployment and rising interest rates, the stalemate will be broken and many won't be able to just sit tight and wait for prices to 'recover'

The issue is supply and demand, hence prices will not fall, especially in places like London, until the supply issue is solved.

Tired old cliche, that's beneath you. At least you didn't tro out the "small island" line.

Basically we need more, sensibly priced houses built pronto and if schemes like Firstbuy help to do this, by supporting the housebuilders, then it is a means to an end.

This is the crux of the issue. Firstbuy doesn't encourage more sensibly priced houses. It encourages more overpriced houses, by essentially giving a taxpayer-funded subsidy to the housebuilder and locking the buyer into massively overpaying for the rood over their heads

HAMISH_MCTAVISH

poppy10 wrote: »

I've read that sentence several times, I still don't understand what you mean.

Seems clear to me.

FTB-s should not be wishing for the value of other peoples assets to decline, and the corresponding knock on effects with the banking system crashing, unemployment increasing, mortgages becoming ever less available for them, and a likely double dip recession. Instead they should be campaigning for more 'affordable housing' to be built.

You underestimate the stampede effect. Prices falling 30% over a year or two could cause panic and a rush to sell before prices fall further. In any case, many people won't have the luxury of refusing to sell just because they can't attain the price they want. Particularly once interest rates start to rise from their 500-year low level, you can expect to see a wave of forced sellers who aren't able to keep up with their mortgage payments.

Well that's a lot of discredited memes for one paragraph....

But lets look at reality.

Prices fell by 23% in the crash. There was no panic and rush to sell, just the opposite in fact. Houses on Rightmove fell from 1.1 million to just 600,000. Supply fell off a cliff until demand exceeded supply and prices rose again, and have stagnated now for the last year or more at just 10% or so below peak.

Why would an extra 7% make a difference?

The housing market is already stagnating. Mortgage approvals are at ten-year lows.

Quite.

The housing market is stagnating...... Not crashing, but stagnating.

With the highest unemployment in decades, the removal of 70% of mortgage funding from the market, the worst recession in a generation, a global financial crisis, and years of doom and gloom from the media, house prices are just 10% below peak and stagnating.

That should tell you something. (hint, it might have something to do with the housing shortage you deny exists)

With increasing unemployment and rising interest rates, the stalemate will be broken and many won't be able to just sit tight and wait for prices to 'recover'

Unemployment is currently falling. Interest rates will rise eventually, but it won't be soon and they won't rise far or fast when they do. Most economists expect base rates to still be below 3% in 5 years.

Now given that 97% of the people in full time work before the recession are still in work after it, and given that they could afford base rates of nearly 6% then, what makes you think they'll suddenly all have to rush for the exits today?

Especially when 75% of those who lose a job find another within 6 months, and support for mortgage interest takes care of most of the rest?

Tired old cliche, that's beneath you. At least you didn't tro out the "small island" line.

But true.

UK population is growing by 408,000 people a year, adding 252,000 households a year, and we build just 100,000 or so houses.

The shortage is reaching crisis proportions.

And the crash has resulted in housebuilding falling to the lowest level since 1923 last year, and new starts are down 41% from that YoY so far this year.

The seeds of the next boom have already been sown. Now you're force feeding them miracle grow.....

Just as the next generation of FTB-s reaches buying age starting from 2012 onwards, (a generational bulge that is the biggest in history, by the way, bigger even than the baby boomers) they're going to collide with the biggest housing shortage in UK history.

There's only one possible result. And it ain't a crash.

This is the crux of the issue. Firstbuy doesn't encourage more sensibly priced houses. It encourages more overpriced houses, by essentially giving a taxpayer-funded subsidy to the housebuilder and locking the buyer into massively overpaying for the rood over their heads

And the only way you'll see "more sensibly priced houses" is if you build more of them.... A lot more.... Many millions more, in the next decade or so.

But builders won't build what they can't sell. So the only way building will happen is with a return to much more lending to FTB-s, at sensible 5% to 10% deposits and without interest rate penalties.

Otherwise, the next generation of youngsters are doomed to enrich their landlords, as owner occupier percentages fall further, and rents keep soaring. Creating a devastating effect on prosperity for the next generation, and all as a result of the house price crash you seem so determined to cheer on.

Bizarre.

franklee

amontlake wrote: »

If house prices fall 25% or 30% then the housing market will completely stagnate as noone will sell. It is even happening now as vendors refuse to accept lower, more realistically priced offers despite recomendations from the better estate agents.

There are many people who will sell once they are convinced of what the market is doing, just not those who purchased near peak prices with little deposit who become marooned in their first property.

The people who will sell are those who wish to move on with their lives and can afford the drop, a loss of a little equity won't bother them so long as they are getting a good deal on the place they are buying. Actually a fall of 25% or so across the board benefits those wanting to trade up. Obviously those who are trading down lose out but then they've probably had enough gains over the years for that not to matter.

We haven't seen that much realistic pricing yet due to low interest rates, what we have seen is people keeping the old place, letting it out and buying again. Frankly the figures for this barely stack up so rising rates will put an end to it IMO.

So rather than holding out for unrealistic peak prices I think people would be better off thinking of how much it'll cost them overall to move from A to B. When they do that price drops really aren't bad news for many more than just FTBs.

amontlake wrote: »

The issue is supply and demand, hence prices will not fall, especially in places like London, until the supply issue is solved.

The issue is supply of money, most people need loans so can only spend what they can borrow. Irresponsible lending has pushed prices up, a return to sensible lending the reverse.

HAMISH_MCTAVISH

franklee wrote: »

There are many people who will sell once they are convinced of what the market is doing, just not those who purchased near peak prices with little deposit who become marooned in their first property.

Roughly 25% of homeowners (50% of mortgage holders) cannot sell at a significantly lower price if they wish to preserve their current LTV ratio for mortgage purposes. And failing to preserve that will cost them far more in the long term.

And of the 50% or so with no mortgage at all, most will be downsizing as their next move, and price falls are very bad news indeed for them.

This nonsense that more people will sell at lower prices has been discredited already. We had a 23% fall from peak, and supply fell off a cliff, with the number of properties on Rightmove falling from 1.1 million to just 600,000.

The people who will sell are those who wish to move on with their lives and can afford the drop, a loss of a little equity won't bother them so long as they are getting a good deal on the place they are buying.

Those are the people selling now. There aren't any more of them, otherwise prices would be lower.

Actually a fall of 25% or so across the board benefits those wanting to trade up.

But as we have seen, prices don't fall equally across the board.

FTB properties fell much more than 2TB properties in the crash... The gap widened for most people to trade up, instead of narrowing.

Obviously those who are trading down lose out but then they've probably had enough gains over the years for that not to matter.

That's an immensely silly statement.

For most people trading down, their house IS their pension, after Gordon Browns raid on their actual pension fund.

OF COURSE it matters, and you have precisely zero prospect of seeing that demographic giving up their retirement so you can get a cheap house.

We haven't seen that much realistic pricing yet due to low interest rates, what we have seen is people keeping the old place, letting it out and buying again. Frankly the figures for this barely stack up so rising rates will put an end to it IMO.

The figures stack up rather nicely, as the soaring cost of rent due to the housing shortage has meant mortgage payments are cheaper than rent in 80% of the UK, even with mortgage rates at 5%..... Let alone with mortgage rates at todays average of 3% or so.

And as rents are forecast to keep soaring for some time yet,whilst rates are forecast to stay low for many years to come, that situation will only improve.

So rather than holding out for unrealistic peak prices I think people would be better off thinking of how much it'll cost them overall to move from A to B. When they do that price drops really aren't bad news for many more than just FTBs.

Wrong again.

The issue is supply of money, most people need loans so can only spend what they can borrow.

True. Which is why a million FTB-s have been prevented from buying in the past few years.

Irresponsible lending A lack of housebuilding has pushed prices up,

Fixed that for you.

a return to sensible lending the reverse.

Let me know when we have a return to sensible lending then.....

When the housing minister of the UK admits that even he wouldn't get a mortgage, that isn't sensible lending, it's a ridiculous state of affairs.

HAMISH_MCTAVISH

amontlake wrote: »

Ok, I am here to "slug it out"!

Good for you.

Hope you stick around.... This place is addictive.

amontlake

HAMISH_MCTAVISH wrote: »

Good for you.

Hope you stick around.... This place is addictive.

Ha, thanks I am beginning to notice that !

Good to read some of the responses and a useful way for me to gage opinion - lots of people like yourself that I can learn from - some excellent points very well made.

It is unfortunate how many people believe that commentators like myself say things just for the sake of it or because we are being paid - we are not, just being honest.