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DervProf

mcc100 wrote: »

What a foolish comment. You have no idea as to what savings I have as I have never felt the need to provide details of my finances on an anonymous forum.

Whatever savings you have it is very revealing of his character, that RM "has a pop" at you by suggesting that he has more savings. That just confirms that he is a shallow show off.

RM is Harry Enfield (but less funny). Do I win a prize ?

Rich_by_Name_2

DervProf wrote: »

So, if prices fall 30% over the next few years, that's bad.

If prices rise 30%, that's OK.

Mmmm. Some people have short memories. Ask those in the US if they think "ever rising" property prices are a good idea. It's amazing how so many people in the UK have been "brainwashed" into thinking that a reduction in property prices is bad news, and that negative equity if the curse of the devil.

If a reasonably small proportion of mortgage payers have to "suffer" negative equity for a few years, in return for lower borrowing requirements and a shift from speculative investment in property, then so be it. Given the choice between being "priced out" or having negative equity for a few years, I wonder what a potential FTBer would choose ?

You've put a lot of words in my mouth that I haven't said so well done for that. If you re-read what I've said, I've not advocated ever-rising property prices or speculative investment into property. I certainly don't remember saying those things but perhaps my short term memory isn't what it should be - thanks for pointing that out too.

Given that the a typical first time buyer is likely to be young they are most likely going to buy a flat or small house that is suitable for their, and that their needs are likely to change dramatically over the first few years of their mortgage, the prospect of having their savings go into a small property and them being stuck there for the best part of a decade only to draw even at the end of it is much more scary than being priced out, easily.

And I'm pretty sure that a first time buyer that has put five years of heavy savings into a house only to see the situation described above become a reality would absolutely view negative equity as the curse of the devil. Unfortunately, it is the first time buyers of the last few years that are most at risk.

You seem to want to take from Peter in order to give to Paul. It's easy to turn around and say "it would be no bad thing" when "it doesn't directly affect me".

Given the choice between having negative equity for many years and seeing all their savings dissolved into a property, and, oh there would be no other choice I wonder what a FTBer of 2009 would choose (even if they are 'only' a relative few)?

DervProf

Rich_by_Name wrote: »

You've put a lot of words in my mouth that I haven't said so well done for that. If you re-read what I've said, I've not advocated ever-rising property prices or speculative investment into property. I certainly don't remember saying those things but perhaps my short term memory isn't what it should be - thanks for pointing that out too.

By perpetuating the mantra "negative equity is a terrible thing", you are simply suggesting that any fall in property prices is to be avoided. That suggests that prices should only be allowed to rise, or at least remain static for a while.

Lots of people buy cars, knowing they will fall in value and cost money. I don't see why people expect to buy a place to live in, live in it, then "make a profit". That profit comes at the expense of the next buyer. This can't go on forever, or can it ?

HAMISH_MCTAVISH

DervProf wrote: »

"negative equity is a terrible thing",

Well it isn't exactly a good thing, for either the individual or wider society.

any fall in property prices is to be avoided.

That would be good for stability.

That suggests that prices should only be allowed to rise, or at least remain static for a while.

A better idea by far than having them crash.

Lots of people buy cars, knowing they will fall in value and cost money.

With the exception of particularly rare classics, cars are usually not considered assets but rather consumer goods.

After all, you can pretty much produce as many as you need at will.

Which is certainly not the case with UK housing and land.

I don't see why people expect to buy a place to live in, live in it, then "make a profit".

People expect that the value of their biggest asset should increase in nominal terms, and at the very least stay constant in real terms.

It has always been this way.

That profit comes at the expense of the next buyer.

Indeed. As it has always been.

This can't go on forever, or can it ?

Of course it can.

Prices can rise in nominal terms indefinitely. Of course, there probably is a limit to real terms rises, but we're nowhere near that point yet.

I would suggest the practical limit to the cost of buying a house is the equivalent of a lifetime of rent. So around 3 times today's prices in real terms.

DervProf

Oh Hamish.

Rich_by_Name_2

DervProf wrote: »

By perpetuating the mantra "negative equity is a terrible thing", you are simply suggesting that any fall in property prices is to be avoided.

Not exactly. The mantra that "Negative equity is a terrible thing" does not mean that 'any fall in property prices is to be avoided'. Far from it. However, a SIGNIFICANT fall in property prices' would cause misery for last years FTBs, however insignificant in numbers those individuals, couples, and families are, and however insignificant their lives might appear to those that would be largely unaffected.

DervProf wrote: »

That suggests that prices should only be allowed to rise, or at least remain static for a while.

What I have found interesting over the last few years is, in this area at least (Warks), there hasn't been a great price crash as was predicted. Entirely speculative on my part, I get the impression that potential sellers simply don't like to see paper losses, like it's some measure of failure or something, and they are surprisingly resistant to it. A Second Time Buyer has to be resistant, but the others (in theory) don't have to be so resolute. So it's only repossessions, and other forced sales that will force the price down. Anyway, I think for that reason prices will stay relatively static for a while.

DervProf wrote: »

Lots of people buy cars, knowing they will fall in value and cost money.

Cars aren't a good comparison though. You expect to have to ditch a car to scrap within, being generous, 25 years which means it has no value after that time - but people buying that know that this is the case. Houses don't have the relatively short shelf life that a car has.

DervProf wrote: »

I don't see why people expect to buy a place to live in, live in it, then "make a profit". That profit comes at the expense of the next buyer. This can't go on forever, or can it ?

Aside from investors who, if they are any good at investing, will cherry pick certain properties I don't think people do expect to make a profit these days, do they? I don't think it's that unreasonable to not expect to be plunged into massive debts that selling your house can't cover after seven years of living there (see my earlier example).

Thrugelmir

Rich_by_Name wrote: »

And I'm pretty sure that a first time buyer that has put five years of heavy savings into a house

On the whole they don't.

Rich_by_Name_2

Thrugelmir wrote: »

On the whole they don't.

Yip, I know enough people that have had parental handouts that have covered deposits. I doubt statistics are available though that indicate how many have saved and how many have been given their deposits, so it's speculative (though please prove me wrong as I would love to know).

BUT, there are loads of posts on MSE about saving for a deposit. If there is to be a housing crash then it is to the detriment of those people that have worked hard to get themselves in the position of owning their own home.

And while some people may point out that they are the relative few, that doesn't excuse hanging them out to dry because of their lack of weight in numbers.

shortchanged_2

This argument surely has to be about the greater good.

Whichever ever way it goes some people are going to lose out. With interests rates as they are now, borrowers are benefitting and savers are suffering.

I do honestly believe that the greater good for this country in the medium to longer term is a cheaper, well regulated housing market that is accessible to many. To acheive this and to help prevent further boom and bust cycles house prices need to drop and lending needs to be strictly maintained to keep a lid on things.

Yes I do feel sorry for people who bought during the peak, but I also feel sorry for FTB's who are expected to pay the stupid prices for houses to get on the ladder these days.

The bottom line is there will be some losers out of this and to be honest most of us who are to blame are current homeowners who bought pre boom because we are the greedy ones who are wanting something for nothing.

Basically the housing market over the past decade has been nothing more than one of those horrible pyramid schemes, where if you came in late you basically lost out and your money funded the peoples riches who got in earlier.

shortchanged_2

Rich_by_Name wrote: »

BUT, there are loads of posts on MSE about saving for a deposit. If there is to be a housing crash then it is to the detriment of those people that have worked hard to get themselves in the position of owning their own home.

QUOTE]

Yes but don't you think during the boom years there were many FTB's who never actually saved for a deposit because the banks were handing out 100%+ mortgages back then.